FACULTY OF BUSINESS

DEPARTMENT OF ACCOUNTING AND FINANCE

RESEARCH PROPOSAL ON ASSESSMENT OF
INTERNAL CONTROL OVER CASH (IN A CASE OF
ADDIS ABABA WATER SUPPLY SERVICE)
PREPARED BY:- YEWUBDAR ADUGNA

:- TSEDALECH ABERA

:- MAHLET SEBESSIBE

:- RAHEL ASSEFA

ADVISOR:-Mr.TESFAHUN

Adddis Ababa, Ethiopia

June 2019
 ACKNOWLEDGEMENT

First and most, we heartfelt thanks goes to the glorious and almighty God for his an endless
support in every aspect of our life with his mom st .marry .We are highly indebted to our
essay advisor Mr.Tesfahun, for devoting his time and effort in reading our paper going
through each and every point thoroughly, and for his constructive and expertise suggestion
without which this paper could not be completed.

In addition, we thank go to all finance department members of Addis Ababa water supply
service for their unreserved support to provide data for the study and also we are warmly
acknowledged the contribution of Eden Zelalem by writing this paper.

Last but not least we deep appreciation also goes to our best, best and best familys for them
uncounted support and for their financial and psychologically support for our enrolment in
the world of education.

Page i
 ABSTRACT

The detail examination of this research paper focuses on ‘internal control over cash in case
study of ADDIS ABABA water supply service, The paper comprises descriptive research that
identifying the strength and the problem faced and assessing control over cash in Addis
Ababa water supply service. The required data to conduct the study was obtained through
questioners and also secondary data from the office manuals. Finally based on the finding of
the study expected that reveal some valuable face forward recommendation and conclusion
in order to improve the performance of Addis Ababa water supply service with regard to
internal control over cash activity.

Table of contents

Contents page No

Page ii
ACKNOWLEDGEMENT......................................................................................................................i
ABSTRACT..........................................................................................................................................ii
Table of contents....................................................................................................................................ii
CHAPTER ONE...................................................................................................................................2
INTRODUCTION................................................................................................................................2
1.1 Background of the study........................................................................................................2
1.2. Statement of the Problem.........................................................................................................2
1.3. Objectives of the Study...............................................................................................................2
1.3.1 General objective..................................................................................................................2
1.3.2 Specific objective..................................................................................................................2
1.4 Significance of the Study.................................................................................................................2
1.5. Research Design and Methodology............................................................................................2
1.5.1Data Type, Sources and Collection Methods.........................................................................2
1.5.2 Sampling Size and Technique...............................................................................................2
1.6 Methods of Data Analysis............................................................................................................2
1.7 Scope and Delimitation of the Study...........................................................................................2
1.8 Organization of the Study........................................................................................................2
CHAPTER TWO...................................................................................................................................2
LITRATURE REVIEW........................................................................................................................2
2.1 Definition and Meaning of Internal Control................................................................................2
2.2. Types of Internal Control............................................................................................................2
2.3 Purpose and objective of internal control.....................................................................................2
2.4 Essential elements of sound internal control................................................................................2
2.5 Provisions of internal control.......................................................................................................2
2.6 Inherent Limitations of Internal control.......................................................................................2
2.7 Internal Control and External Auditor.........................................................................................2
2.8 Internal Control and Internal Auditor..........................................................................................2
2.9. Internal Control for Cash............................................................................................................2
2.10. Definition of Cash Management...............................................................................................2
CHAPETR THREE...............................................................................................................................2
DATA PRESENTATION AND ANALYSIS.......................................................................................2
3.1 Background of the Organization............................................................................................2
3.2 Procedures Applied for Cash Collection................................................................................2

Page iii
 3.3 AAWSS Source of Fund........................................................................................................2
3.4 Documents Used for Cash Collection and Payment...............................................................2
3.5 Cash Collection Pattern.........................................................................................................2
3.6 Responsibility of Cashiers.....................................................................................................2
3.7 How to Record Cash Collection.............................................................................................2
3.8 How to Record Cash Payment...............................................................................................2
3.9 Existing Cash Payment Procedures........................................................................................2
3.10 Reasons for Cash Payment.....................................................................................................2
3.11 How to Made Payment from the Petty Cash Fund.................................................................2
3.12 Check Payment Procedures....................................................................................................2
3.15 Recording Petty Cash Payment Vouchers..............................................................................2
3.16 Recording the Check Payment Vouchers...............................................................................2
3.17 Existing Cash Control Mechanism.........................................................................................2
3.18 Preparing Bank Reconciliation..............................................................................................2
3.19 Supervise Cash Count................................................................................................................2
CHAPTER FOUR.................................................................................................................................2
CONCLUSION AND RECOMMENDATION.....................................................................................2
4.1 Introduction.................................................................................................................................2
4.3 Recommendation.........................................................................................................................2
REFRENCES .------------------------------------------------------------------------------------------------------------2

Page iv
 CHAPTER ONE

INTRODUCTION
1.1 Background of the study

Cash is important current asset for the operations of the business and is the basic input to
keep the business running on continues basis. It is also the ultimate output expected to be
realized by selling the service or product manufactured by the firm. Any firm should keep
sufficient cash neither more or less. Cash shortage will interrupt the continuity of the firms
operation while excess cash will simply remain idle, without contributing anything towards
the firms profitability.(pandey;p,911)

Cash management is concerned with the managing of;1)cash flows into and outflow of the
firm 2)cash flows within the firm, and 3)cash balance held by financing deficit or investing
surplus cash. Sales generate cash which has to be distributed out. The surplus cash has to be
invested while deficit has to be borrowed. Cash management seeks to accomplish this cycle
at a minimum cost. Cash management assumes more important than other current asset
because cash is the most significant and least significant asset that affirm holds.
(pandey,1999;p,912)

Cash flows of a firm (out flow) as it pay for the goods and services it purchase from others.
Cash flows in to a firm as customers pay for the goods and services they purchase and
services they take. When refer to cash, we mean the amount of cash like assets-currency, coin
and bank balances.(financial management and analysis;page630)

Addis Ababa water supply bureau holds some of its assets in the form of cash for several
reasons. It needs cash to its day to day operations. Referred to as transaction balance, the
amount of cash needed for the accomplishment of their purpose differ from one officer to
another. Companies do not keep their cash in little tin box; they keep it in a bank deposit. To
understand how they can make best use of that deposit, you need to understand what happens
when companies withdraw money from their account or pay money in to it.(fundamentals of
corporate finance third edition; page 202)

In every well-organized concern there exists a large number of ways and means where a
check is imposes on the accuracy of excusive works. In this research how Addis Ababa city

Page 1
water supply service (AAWSS) collects cash will discuss. In additions the cash payment
procedure i.e. reason for cash payment procedures and document use will discuss. Finally
petty cash establishment and replenishment practice and payment of petty cash will discuss.

Other Researchers on this topic addresses how companies and service render organizations
including Addis Ababa city water supply service provider (AAWSS) control their inflow of
cash. They does not deal their out flow of cash. Additionally they mainly focus on financial
statements regarding cash. By standing from this study; our research will try to address
internal control over cash on both inflow and out flow by seeing financial statements and
different sources; among other sources, receipts and records are best example.

1.2. Statement of the Problem

The management of cash is important in any business enterprise because cash is means of
acquiring goods and services. The risk of theft is directly related to the ability of individuals
to access the accounting system and obtain custody of cash. Firm’s address their problem
through internal control system. AAWSS is a governmental organization which gives water
utility service in the country. The complexities of its operation makes its short term and long
term assets susceptible to risks emanating both intentional and unintentional acts with the aim
of preventing those acts, AAWSS utilizes internal control system. So in this study the
researcher attempts to assess whether or not the cash control system is designed in conformity
with generally accepted accounting principles (GAAP) and legal requirements.

The current problem of AAWSS is uncertainty of cash collection from the customer. Here are
some areas where the management of AAWSS needs to give a high emphasis in making
decision. Such areas are;
 Source of cash collection and method of cash collection.
 The cash deposit pattern to be follow.
 Reasons for cash payment and their procedure.
 Decisions regarding petty cash.
 Cash controlling mechanism.
 Decision about check payment.
 To follow up weather cash collection is in case of conducting properly or not.
 To check weather cash payment is reasonable or not.

Page 2
  Cash an asset that is most susceptible to theft and misappropriation.

In the context of the problems we discusses above this research will design to find answers
for the following research questions;

1. What type of techniques does AAWSS uses to control its cash?

2. How does AAWSS manage its cash payment and cash receipt?
3. Does AAWSS have procedures for controlling its cash?

What type of procedures they use to establish and replenish petty cash

1.3. Objectives of the Study

1.3.1 General objective

To assess internal control over cash that will design in conformity with general accepted
accounting principle (GAAP) and legal requirements in AAWSS.

1.3.2 Specific objective

The specific objectives of the study were,

1. To examine how management procedure is effective with regard to cash receipt

2. To evaluate the cash control techniques placed by the firm
3. to assess effectiveness cash controlling procedures by observing their financial
statement
4. To assess the appropriateness of the firms petty cash establishment and replenishment.

1.4 Significance of the Study

This proposal will give information for individuals who want to work further research
regarding internal control over cash. By reading this proposal anybody can get knowledge
about how cash control system takes place. In addition students who are studying about
internal control theoretically in the classroom will be able to see its application in the real
world by reading this proposal. The research will also pin point problem areas of controlling
cash management and suggest solution for consideration by the Addis Ababa water and
sewerage authority.

Page 3
1.5. Research Design and Methodology

1.5.1Data Type, Sources and Collection Methods

The study issue both primary and secondary types data. Primary data is collecting through
personal observation and in questionnaires. Secondary is also collect through reviewing
companies operational, companies financial statements and written documents such as books
and articles.

1.5.2 sample size and Technique

The sample size for the study was 15.These samples were taken one from general manager,
five from different department managers and the remaining nine were from employees
including cashiers, storekeeper, accountant and others. The sampling technique for the study
was random sampling.

1.6 Methods of Data Analysis

After the information has been collected, the researcher proposes and analyses it by using
tables and descriptive approaches and data collected from primary and secondary data type is
interpret. The researcher use descriptive approaches; tables and statements.

1.7 Scope and Delimitation of the Study

Internal control is a comprehensive term that exists in each and every where there is an
importance of management. But the scope of this study is deliminate to internal control over
cash in AAWSA.

1.8 Organization of the Study

The paper was organized in to four chapters. Chapter one includes background of the study,
statement of the problem, objective of the study, scope and delimitation of the study,
significance of the study, methodology and organization of the paper.

The second chapter would deal with theoretical and emphatically literature review. The third
chapter would also concentrates on the result analysis and discussion. Finally, the conclusion
and recommendation parts of the study have been included in the fourth chapter.

Page 4
 CHAPTER TWO

LITRATURE REVIEW

2.1 Definition and Meaning of Internal Control

Different authors give different definitions about internal control such as: According to
Spicer and Pegler, ”internal control is best regard as indicating the whole systems controls,
financial and other wise, estimated by the management in the conduct of the business
including internal cheeks, internal audit and other form of control”.

According to Howard F.settler”Internal control, in abrader term, is generally used to

encompass both internal check and audit.”

According to council of the institutes of chartered accountants of England and Wales

‘’Internal control is the whole system of controls, financial and otherwise, established by the
management in order to carry of the business of the company in an orderly manner,
safeguarding its records”

Discipline’s approaches to the concept of control have drawn the attention of many
disciplines: According to WalterB.Meigs,

“A system of internal control consists of measures employed by business for the purpose of:

1. Safeguarding its resources against waste, fraud and in efficiency

2. Promoting accuracy and reliability in accounting operating data

3. Encouraging and measuring compliance with company’s policy and

4. Judging the efficiency of operation in all divisions of the business

The scope of internal control extends beyond the accounting controls and includes all
operational control and includes all operational control as quality control, budgetary control,
work standards, periodic reporting, internal check and internal audit. Satisfactory system of
internal control depends on the following;

1. A clear plan of the organization established by the line of authority and responsibility and
proper division of work.

Page 5
2. A well organized and adequate accounting structure with well laid down rules, procedures
and policies.

3. Men of ability and experience to execute the work well.

4. Proper system of reporting and communication from lower level management to the top
level management (d.p.jain1993; p158)

“Max Weber expounded on the division on function among different level of authority and
responsibility between superior and subordinate denoting positive and negative bureaucracy
at may result.” “Political science thinkers identified the control of power of governance by
the division of authority between legislative, executive, and judiciary.

2.2. Types of Internal Control

A. administrative controls

“Administrative control emphasizes on controls for management decision concentrating on

authority and responsibility for authorization of information; as such includes plan of
organization structure and procedures and records related to the decisions process.”

B. Accounting Controls

‘’Accounting controls emphasize on reality of financial records and safeguarding of assets

and records for providing reasonable assurance on transactions and financial information
needs for appropriate action.’’

Internal control is defined by AICPA as all coordinate methods and measures within an
organization or within a system adapted to safeguard assets, check accuracy and reliability of
accounting data, promote operational efficiency, and encourage adherence to prescribe
managerial policy.

Over all internal controls are also defined as operational checks and balances that prevent loss
due to fraud, waste, abuse, and management of resource. Recourse include: personal,
information, and capital ;(Johanneskinfu,1966;p.102)

2.3 Purpose and objective of internal control

 To aid management in information, protection and control.
 To protect asset from theft, loss, damage, spoilage, wastage.
 To prevent errors and frauds in advance before they occur.

Page 6
  To assure accuracy and dependability of personnel and
financial operation.
 To monitor operating efficiency.
 To monitor adherence to prescribed policy.
 To provide evidence of responsibility.

2.4 Essential elements of sound internal control

“Ideally good internal controls should provide for:

 Adequate and competent personnel

 Separation of custodianship, operations, and record keeping
point.
 Proof of work done(documental evidence)
 Adequate and appropriate physical protection of assets and
records.
 Assurance of mechanical accuracy
 Assurance of efficiency and effectiveness

In the above description of purpose and objective, and essential elements of sound internal
control we should note the prevention and detection aspects of internal control.”(R.gsaxena,
1996;p.32-35)

2.5 Provisions of internal control

 ‘’Internal controls are provided through:
 Administrative control and personnel controls:
 Accounting controls or financial control techniques and
mechanisms;
 Internal control systems, procedures, and techniques which
could be part of overall control environment or uniquely specific to an
item or event;
 Organization structures and division of function and
responsibility;
 Policies and procedures, rules and regulations guidelines, and
manuals.

It is the responsibility of management to start-up and monitor internal control system in

organization, after assessing its vulnerability through analysis of the potential risk involved in

Page 7
its operations. For the auditor on the other hand internal control review is of the basis for his
reliance or non-reliance of the results of operation and determination of extent of test that will
make, and the type of auditing procedures to be applied.

Another more recent approach to the review of internal control is to consider the operations
sub systems as study unit by segmenting organization function as focal point of sub systems,
such as sale, acquisition, receipt storage and issuances of inventory, cash receipt and
payments, acquisitions an d depositions of plant assets and capital acquisitions, accumulation
and deposition.”(R.g.saxena; 2001.p.56-58)

2.6 Inherent Limitations of Internal control

Internal control is not simple it could be complex it could be complex as it involves division
of functions and allocation of responsibility in to many different people and unites involving
greater paper work leading to excessive control efficiency, gain and loss in productivity.
Thus, there is control risk that end safeguards to be implement. Internal control cannot give
as all the reliance we needs. Internal control can only provide responsible assurance not
complete reliance to be placed.

Internal control can be costly as it may entail increased potential and sophisticated techniques
of control. Thus cost benefit to derived in this regard internal controls may be more viable to
implement in large rather than in small organization.(Johhanneskinfu,1966.p.72)

2.7 Internal Control and External Auditor

‘’As mentioned earlier external auditors interest in control is in order to help him determine
extent of reliability of organizations results, and effectiveness of control its operations. To
this end he/she reviews the internal control.”

a. To understand the existing control system and procedures

b. To evaluate their adequacy in fulfilling internal control objectives by identifying strength

and weakness

In is worth not think that study and review of internal control is the part of independent
auditor’s standard of field work. He/ she accomplish this objective through:

 Internal control questioner

 Interview
 Testing

Page 8
  Study of organization charts, manual and procedures

2.8 Internal Control and Internal Auditor

“Internal auditors as will study in some detail later are a means of management control
mechanism established internally, and arising out of need for verification, evaluation and
compliance of internal control operation. It is designed for management internal purpose. As
such internal audit is part of the internal control system in the organization, while at the same
time internal audit (or auditor),is responsible for the surveillance of the effectiveness of
internal control system and involved in the weakness and strength.”

Components of Internal Control System

Internal control system consists of the following five components

 environment
 Risk assessment
 Control activities
 Information and communication
 Control Monitoring

The control environment sets the rule of the organization by influencing the control
consciousness of its people as such, it reflects over all attitude, awareness and action of the
board of directors, management and other concerning the importance of control and its
emphasis in the entity. It is the foundation for all the other components of internal control.

Risk assessment is the process of an organization goes through to identify and analyze the
relevant risk that may affect achievement of its objective. For example, management must
evaluate the risk that its computer system may be destroyed or damaged, and that it will loss
all its information stored on the system. Once management assesses the risk, it designs cost
effective controls such as regular back up of computer fill and offsite storages to mitigate the
risk control activities are the policies and procedures established by management to ensure
the accomplishment of objectives and mitigation of risk. Examples of importance control
activities include performance review, segregation of duties, computer data entry controlled
and physical control that limit access to assets.

Information and communication referees to the process of identifying, capturing and

exchanging information in a timely fashion to enable accomplishment organization objective.

Page 9
It includes the organization accounting system and method of recording and reporting on
transactions.

Monitoring can be done through on going activities or separate evaluations. Ongoing

monitoring procedures are built in to the normal requiring activities of an entity. Internal
auditors, customers and regulators contribute to the monitoring of internal controls. There is
logical loop to organizations internal controls, starting with;

1. The design of his control environment

2. The identification of organizational risk and controls to minimize those risks

3. The design and implementation of controls a communication system, and

4. The monitoring of the effectiveness of the controls mitigates risk.

Control policies were developed at the corporate level, and division managers were expected
to act consistently with the policies. One of management’s approaches to influence
performance was to compensate division management with bonuses based on division
profitability. Division managers perform well given promotions. Divisional managers, in turn
set the tone for control at their respective division. Some division managers quickly learn that
in enhance profit could report by keeping the books open after the year-end; that is they could
report next year’s sells as current year’s sales. Since all members of the division’s top
management reaped the benefits resistance to overstating sales was minimal.

An organizational control environment is complex and somewhat subjective to evaluate the

subjective should not preclude the auditor from thorough understanding the effectiveness of a
client control environment in mitigating the risk of account misstatement. The auditor
standard board suggests that the following factor be considered when evaluating the client
control environment;

 Managements’ philosophy and operating style

 Organizational structure, including the assignment of authority
and responsibility.
 Board of directors and audit committee
 Integrity and ethical values
 Commitment to competence

Page 10
Together, these factors provide the overall guidance to the organizational for implementing
specific controls. Because its environment is the broadest manifestation of the organization
control philosophy, the auditor needs to gain understanding of control environment.

Management Philosophy and Operating; control is a function of management influencing

human behaviour to make things happen in certain way to achieve specific organizational
objectives. The key is human behaviour.

Organizational Structure; well controlled organizations have clearly defined lines of

responsibility, authority, and accountability. The auditor must assess compatibility of the
organization structure with the nature of the organization operation. Both management and
the audit must anticipate problems that are likely to occur when and organization structure is
inconsistent with the nature of its business and competitive environment.

Board 0f Directors And The Audit Committee: members of the board of directors are the
representatives of shareholders and have the major responsibility for management over sight,
including evaluating and approving the organizations basic strategy, Auditors are concerned
that the board of directors performs its over sigh function and approves major corporate
initiatives to ensure such initiatives are in the best interest of the organization for example,
the board of directors should approve:

 Major new debt or equity financing

 Acquisition of other companies
 Major diversities and corporate restructuring
 Appointment of ,and compensations for, top officers

The committee of board of directories is of importance (1) the audit committee and (2) the
personnel and compensation committee. The personnel and audit committee is responsible for
recommending the appointment of top officers and compensation package for senior
management.

Human Resource Policies and Practices: organizations need to establish policies and
procedures for hiring, tracing evaluating, counselling promoting compensating, and taking
remedial action regarding their employees. These procedures are most often found in
personnel policies designed to insure that the organization hires the right people. That hiring
and retention decisions comply with applicable federal and state laws and regulations that
employee are properly trained and supervised and the organizations respects employee right

Page 11
and responsibilities. The auditors review of personnel policies is designed to be providing an
understanding of the overall control philosophy embodied within those policies and weather
such policies are effectively implemented .Further personnel policies may contain
information of importance to financial statement accounts such as pay roll expense and
associated liabilities.

Integrity and Ethical Values: the effectiveness of the internal control and procedures is tied
to the integrity and ethical values of the people who create, administer, and monitor them.
Integrity and ethical behaviours are policies of the entity’s ethical and behavioural standard,
how they are communicated, and how they are reinforced in practice. They also include the
communication of ethical values and behavioural standards to personnel through policy
statement and codes of conduct and by example.

Commitment Competence:- competence is the knowledge and skills necessarily to

accomplish tasks that define the individual’s job. Commitment to competence includes
management’s consideration of the competence levels for particular jobs, and how those
levels translate into requisite skills and knowledge.

Control Environment:

A client’s control environment will involve over time as the organization changes to meet its
competitive force. Therefore, an organization that had a strong control environment in one
year may be significantly deferent in the next year under new management thus auditors must
guard against over familiarity with a client .some auditing funds require that partner of
manager complete a checklist to evaluate each of the control environment factors specified in
the standards .other firms require only a memo summarizing the auditor assessment of the
control environment and describing for the conduct of the audit.

Risk Assessment :The purpose of the entity’s risk assessment is to identify analyses ,and
manages risks that affect the entities ability to accomplish its major objectives .ones risks are
identified, management considers their significance ,the likely hood of their occurrence, and
how should be managed .Management may initiate programs ,or actions to address risks or it
may initiate plans ,programs or actions to address specific risks or it may decide to accept a
risk because of cost or other considerations.

Control Activities: control activities are policies and policies and procedures that help ensure
that management directives are carried out in a timely fission generally, control activity that

Page 12
maybe relevant to an audit of a company’s of financial statement pertain to performance
reviews, information, processing, physical controls, and segregation of duties. A control
activity exists to accomplish a specific objective. Examples include authorization procedures,
prenumbered or time stamped documents segregation of duties and so forth. Often there is no
“one best” control activity. The auditor must consider the sum of activities and determine
whether the activities are sufficient to accomplish the broad control objectives.
(RittenbergSchwieger:p.180-184)

Objectives of Cash Audit

1. Establish available cash that is see how much cash to be there.

2. Provide that cash that ought to be there.

3. Prove whether the cash on hand is needed or not.

4. Check independent accountability for cash transactions.

5. Prove disbursements organizations.

6. Prove handling of receipts.

7. Establish management reporting methods and timely monitoring.

8. Prove cash protection.(Johannes kinfu:1966 p.56)

2.9. Internal Control for Cash

Good and desirable internal control measures which ideally may be considered to duties and
functions are:

●Handling of selling transaction (for additional details see sales internal control
procedures).

●Cash receiving and keeping

●Cash mail receiving

●Depositing of cash

●Comparison of cash receipts and deposits

Page 13
 ●General ledger entries and records-(summary control record sales, accounts
receivable)

●Preparation of bank reconciliation

●Custody of petty cash fund

● Handling of purchase transaction (for additional detail see purchase internal control
producers)

● Payment of voucher preparation

● Check preparation

● Check custody

● Voucher registers (entries)

● General ledger entries and records (summary control records-purchase accounts

payable)

● Advances payment –purchase and travel and other advance

● Budgeting

● Inventory control (storing and issuing)

● Per-numbered forms-cash receipts, checks vouchers and other receipts

Review of internal control would mean reviewing that:

●All sources of cash receipts(sources of incomes) are properly established, identified,

and authorized at point of operations, which includes examining sales process.

●All cash received are documented-includes assuring property of forms and

mathematical accuracy.

●All cash received are handled under strict protective custody which includes
physical protection, daily depositing of cash receipts in tact to bank or central cashier,
and cashier integrity.

Page 14
 ●All supporting records and evidences of cash received are independently
corroborated and maintained.

It is important to note that there are various actions taken, executed, and documents
produced at each separate function of operation, custodianship, and record keeping.
To this it is important to observe the flow charts below.

Chart 1, Cash receiving action/document related

Cash Reporting Reporting &

Cash summarizing
deposit
receiving

General
Cash register
Remittance Deposit slip ledger F/S
A/R, I/S
receipt

Chart 2, cash disbursement action/ document related

Reporting
Payment Reporting &
procedure

General
Voucher Cash
ledger
check payment

Source: - Johnnies Kinfu, 1966:96

2.10. Definition of Cash Management

Cash management is concerned with the managing of;(1)cash flows into and out of the
firm()cash flows within the firm, and cash balances held by the firm at a point of time by
financing deficit or investing surplus cash. Sales generate cash which has to be disbursed out.
The surplus cash has to be invested while deficit has to be borrowed. Cash management seeks
to accomplish this cycle at a minimum cost. Cash management assumes more importance

Page 15
than other current asset because cash is the most significant and the least productive asset that
a firm holds. (Pandey, 1999; P.912)

Cash Payment Procedures

Accounting procedures for cash payments are intended to ensure that cash is disbursed only
by responsible persons. Cash is paid only after assurance, on the basis of documentary
evidences, that the payment is a proper one for goods and services which the student
government /client have received. All cash payments, except the smallest one (petty cash) are
made by checks. Checks show specifically how much was paid and to whom, and the
endorsements on concealed checks are evidences that payee received payment.

Processing customer payments is one of the most important accounting functions for any
business. Cash follow is required for maintaining operations, so companies need a detailed
set of procedures for handling accounts receivable collections in order to insure proper
deposit to the company bank accounts receivable and posting to the customer account.

Deposit the Payments

All customer payments should be deposited daily. If making daily deposit is not fusible you
should still prepare a deposit daily in order to insure the customer gets credit for the exact
date you received the check. Make a copy of all the checks received and date stomp the
copies with the actual date received. Identify each check on the deposit slip by the customer’s
last name on account number. Lock prepares deposits in secured area, preferably a safe, until
you can make the deposit (http//admin.mtu.edu/acct/dept.….)

Petty Cash Procedures

According to the state university of New York fiscal and accounting procedures for
mandatory student activity fee programs (pages5) the custodial and disbursing agent (sub
board ⃝) may establish a petty cash fund. The trustee guidelines limit purchase from petty
cash to $50.

Companies routinely make small purchase, which are not appropriate or practical for check or
credit card payments. Examples of which purchases include stomps, supplies travel expense
and delivery changes, among others. To permit such purchases, companies establish a petty
cash fund. The petty cash fund is set to be sufficient to cover expenses for that period of time
the fund normally manages from 100 to 150.Usually, on individual, called the petty cash

Page 16
custodian or cahier is responsible for maintaining the petty cash fund and documentation of
disbursement made and reconciling the petty cash fund at the time it is replenished.

(⃝) What Is ‘PETTTY’ Cash

Petty cash is an imp rested fund that funds that is used only for expenditures of an incidental
nature. An imp rest fund is a fund established for a fixed amount that is replenished in the
exact amount expended from it .There for a petty cash fund can never contain more than the
original amount that was used to establish it e.g. a petty cash fund established for $250 can
never contain more than $250

(⃝) How Are With Drawl Made From Petty Cash

- There are two method of withdrawing Funds from Petty cash

1. The Reimbursement Method:-petty cash may be used to reimburse on individual for a

purchase that was made using his/her personal funds up on presentation of an original receipt,
under invoices or other adequate documentation to support the expenditure, the petty cash
custodian will reimburse the individual for the exact amount of the purchase. based up on the
documentation presented.

2. The Advance Method: - Petty cash custodian may advance petty cash to an individual in
anticipation of a purpose. Since the purchase has not yet been made at the time of the petty
cash withdrawal, the amount withdrawal may vary from the amount of the actual purchase.
Documentation must be submitted to the petty cash custodian within a reasonable time e.g. If
the actual expenditure was less than the amount advanced, The individual must return the
excess cash together with valid documentation of the expenditure. If the actual expenditure
was more than the amount advanced, requiring on outlay of personal funds by the individual
making the purchase, the individual may be reimbursed for the excess amount often
submitting adequate documentation support the expenditure.
(WWW.sumbboard.com/accounting/pdf/manual/08 petty cash procedure)

Journal Entries and Procedures for Petty Cash

Let’s look at the journal entries and documentation used in working with petty cash fund, and
then we review a detailed example

1. Establishing Petty Cash Fund

Page 17
The first time a petty cash fund is established a company writes a check to a designated petty
cash custodian for the amount of the petty cash fund. The custodian cashes the check and puts
the cash in a secure lock box. At the time the fund is crated and petty cash is received .the
following journal entry is made

Account Titles debit credit

Petty cash xxx

Cash xxx

Disburse Petty Cash For Expenditure

When a company employee spends some cash on small purchases (usually with a prior
approval by a manager), the employee brings the purchase receipt to petty cash custodian.
The custodian then disburses the amount of cash spent to the employee to compensate for the
purchase. The custodian also fills out a petty cash voucher, asks the employee to sign it.
Attaches the purchase receipt to voucher and places the in the secure lock box with the
remaining petty cash.

Sometimes the employee who needs petty cash receives it from the custodian before
making a purchase in this case, the custodian fills out a petty cash voucher, asks the employee
to sign it and gives necessary amount of cash to the employee as an advance after the
purchase is made, the employee brings back the purchase receipt and changes. The changes
adjusts the original voucher to reflect the change received, attaches the purchase receipt to it
and process both in the secure lock box with the remaining petty cash.

There are no journal entries at this point.

The petty cash vouchers serve as proof of cash spending or purchase advance to employees in
case the manager or internal auditor makes an announced audit of the petty cash fund. The
vouchers also serve as documentation showing what expenditures were made with petty cash
and are used to prepare the petty cash journal when the fund is replenished.

A petty cash vouchers typically includes the following information.

 Voucher number
 Date
 Amount

Page 18
  Expense account
 Under name
 Signature

(WWW.finance .ubc.ca/ra/petty cash procedure.cfm

Page 19
 CHAPETR THREE

DATA PRESENTATION AND ANALYSIS

3.1 Background of the Organization

In our country Ethiopia clear water supply was started during the regime of emperor Minilik
Ethiopia capital city of Addis Ababa acquired clear water pipe line which is constructed to
the place and hospitals in 1949EC.The growth in both population sizes of the city itself
together with the improved living condition of the community increased the demand for clean
water supply. In this result the need for an organ which fills the increased demand clear
water. An organ had been established under Addis Ababa city municipality which had served
only 2715 customers for 30 until1974years.

In 1979 Addis Ababa water and sewerage authority has been established. In 1995 the organ
was re-established under proclamation no 69/95. However, it failed to give service for lack of
enabling regulation. In 1999 the agency was newly established under proclamation no 122/99
with the name Addis Ababa city water supply service. Today, the agency increases the
number of customers which were around 5880 in the year 2011. The agency distributes water
from different place. The authority had only 67 employees until 1984. However the number
of employees has been increased day to day and reached 4000 in the year 2011. On the basis
of five year transformation strategy, the authority was created on employment opportunities
for 6 micro finance enterprises and more than 60 workers and contractors.

Vision of the Organization

To have standardized city, which can be an exemplary having adequate water accessibility
and living standard, which can be exemplary.

Mission of the Organization

To create the attitude of speedy and transparency public service by introducing modern
technologies and formations more ever to have financial self-independent institution by
introducing rational tariff system this is based on the communities living standard.

Page 20
Objective of the Organization

To provide clean and sustainable water resource to customer

3.2Back ground information of the respondents

Table 3.2.1 Educational background

Question Respondent

Educational background Number %

Diploma 8 53.3%

First degree 6 40%

Above first degree 1 6.67%

Total 15 100%

Source; own survey, 2013 data

From respondent’s educational level above half which constitutes are diploma and first
degree respondents are 6 in number and 40% from the over all. There is also only one master
who is general manager of the Addis Ababa city water supply service. This indicates that all
employees are capable of doing their job with enough knowledge.

Table 3.2.2 Marital status of respondents

Question Respondents

Marital status of respondents Number %

Married 9 60%

Single 6 40%

Widowed O 0.00%

Divorce 0 0.00%

Separated 0 0.00%

Total 15 100%

Source; own survey, 2010 data

Among over all respondents the greater portion which is 60% is married and 40% is single.
No one is respondent is widowed, divorce and separated.

Page 21
Table 3.2.3 sex of the respondents

Description Respondents

Sex Number %

Male 7 46.67%

Female 8 53.33%

Total 15 100%

Source; own survey, 2010 data

Female constitutes greater amount (53.33%) and male is seven in no and 46 67% from the
over all.

Table 3.2.4 back ground of respondent

Question Respondent

Age Number %

18-30 9 60%

31-40 2 13.3%

41-60 2 13.3%

>60 2 13.3%

Total 15 100%

Source; own survey,2010 data

The greater amount of the respondent age is between 18 and 30 years which is around
60%.Other respondents age is greater than this and the amount is two in each age interval
(13.3%).

Table3.3 cash collection procedures

Question Respondent

What is the procedure for Number %

cash collection applied in
your company

Checks 0 0.00

Page 22
 Drafts 0 0.00

Documentary bills 15 100

Total 100 100

Source: own survey data, 2010

All respondents give feedback as AAWSS use documentary bills procedure for cash
collection. AAWSS assign responsible cashier to handle the cash collection activity from
customers by using documentary bills.

3.3AAWSS Source of Fund

Table3.4 sources of fund

Question Respondents

What is your company source Number %

of fund

Banks 0 0.00

Government 4 26.7

Borrowing 2 13.3

Donation 2 13.3

Others, specify 7 46.7

Total 15 100

Source; own survey,2010 data

AAWSS source of fund is from different sources. But this is responded only seven
respondents which constitute 46.7%in the means of others specify. These sources are both
government in means of budget and incentive, borrowing from credit unions and in the means
of donations from World Bank. Other respondents request that source of fund is only from
government, donation or borrowing which constitutes 26.7%, 13.35 and 13.3% respectively.

Page 23
3.4Documents Used for Cash Collection and Payment
AAWSS use formal printed cash printed ticket (CRT).this document is already pre-numbered
and the numbers are accounted for and because this it is very easy to identify missing receipt
automatically. The record division under the finance department which is structured at head
office level is accountable to follow up the issuance of unused receipt paid for all cash
collectors and to order additional receipts by checking the previous final printed receipt
numbers.

The responsibility of receiving and issuance of unused or newly printed cash receipt tickets
are given to stationary store at store office. Normally cashiers have to submit the pad of use
receipts together with the requisition form to the senior accountant of the head office. The
head office senior accountant will check or compare the previously issued receipt or weather
the cashier is properly utilized all previously issued receipts before approving the newly
requested receipt by the cashier.

The cash receipt documents are pre-numbered. In different theory stated that the document
used by an organization should pre-number for the purpose of internal control of the
organization strength.

3.5 Cash Collection Pattern

Table 3.6 cash collection pattern

Question Respondent

What is cash collection Number %

pattern of your company

Customer come and pay 15 100

The company itself goes and 0 0

collect from customer

Total 15 100

Source; own survey,2010 data

There is real that AAWSS cash collection pattern is customers come to the office and pay
specified amount at specific period. Because all respondents give feedback as the employees

Page 24
including the cash collector does not go out of office to collect cash rather the customer
themselves come to office and pay the obliged amount of cash.

3.6 Responsibility of Cashiers

The main cashiers are responsible to collect cash daily that was collected by cash collector
from customers. They are also responsible to issue an internal cash receipt ticket to each
branch cash collector as evidence. This internal cash receipt ticket is prepared in three copies.
The first copy is given to the branch cash collector, the second copy will be forwarded to the
record division to head office for recording purpose and the third copy remains with the pad
as reference.

Therefore all collector cash through the cash collector will be deposited in the AAWSS bank
account by the main cashier on a daily basis’s. To control the cash collection made by the
branch, AAWSS has opened separate bank account for each branch near the branch water
supply service office. When the main cashier deposit collected cash at the branch account,
they are responsible to fit the bank deposit slip. After depositing the money in the bank
account, the main cashiers at each branch will submit a copy of internal receipt tickets plus a
deposit slip to the branch account section head on a daily basis. At the end of each month the
accountant head assigned at each branch are responding deposit slips for final recording
purpose. This time a formal internal receipt tickets should be assigned by the records division
head and forwarding from the record division head to head office to maintain evidence for
each branch accounts head every month.

In case of collection and deposit pattern of the organization, there is more or less adequate
segregation of duties. This is supported by different authors which is important in every area
of any organization activity. The collected cash of the organization deposited on a daily basis
for the purpose of safeguarding the organization cash.

3.7 How to Record Cash Collection

The records division under the finance department is responsible to carry out the recording
process of the organization accounts. At the end of every month, the records division collects
a copy of all internal receipt (cash receipt) and deposit slip from each branch.

Moreover, after checking the accuracy and reliability between the amount on internal cash
receipts and deposit slips, then a formal journal entry is prepared to record the collection. The
revenue collection section is also responsible to collect bank advice and statements from
individual branch banks which show the exact amount of deposits made by individual branch

Page 25
main cashier. Then immediately they will forward bank advice, bank statement and deposit
slips to the quality control section under the records division for final recording purpose. Up
on receiving those documents from the revenue collection section, the senior accountant of
quality control section will prepare a formal journal entry. Before preparing the journal entry,
the senior accountant will check the amounts in each bank deposit slips against the individual
bank statements. Normally the amount in the deposit slips will be clearly stated by the bank
as accredit in the bank statement credit column .If the senior accountant find a deviation then
he or she will contact immediately to the bank and corrective measures will be made
instantly. On the other hand, if the amounts mentioned on both documents are equal, then the
senior accountant will prepare the following journal entry using a document which is called
journal voucher.

Branch cash at bank account ____________xx

Revenue from water recourse _______________xx

Revenue from sewerage service _____________xx

Revenue from bid document _________________xx

The journal voucher which is pre numbered and it has the following items.

 date of transaction and reference no

 A place to record account code
 A place to record debit account
 A place to record description of accounts
 A place to record credit account
 A place to write explanation about the entry
 Prepared by and
 Approved by

Page 26
Normally the senior accountant will write his name and signature on the prepared by section
and then he will take journal voucher directly the head of the records division for final
approval.

The head of the records division will check the following points before approving the
voucher.

 Weather account codes are properly filled

 Weather account descriptions are properly stated
 Weather the a mounts on the deposit slip and bank statements
are similar
 Weather the debit part and credit part of the journal entry are
equal
 Weather those relevant documents are attached with the journal
voucher
 Weather the senior accountant writes his name and put
signature on the journal voucher.

After checking all the above points, the head of the records division will write his name and
put his signature on the approved journal voucher section.

The method applied by the organization to record cash collection which is complied with the
accounting record. The organization uses journal voucher to record cash collection the
document is pre-numbered and cannot easily duplicated. This method supported by
accounting standard and theories.

3.8 How to Record Cash Payment

Cash payment is firstly needed to be authorized by the responsible authority. To have strong
internal control, any organization should have adequate segregation of duty among different
functional levels. The record of cash payment is needed as soon as the cash is paid.

3.9 Existing Cash Payment Procedures

Like collections procedures AAWSS sets procedures to handle cash payments made by the
organization. When the organizations make payments from 5000-60000birr they use purchase
requisition form and greater than 60000birr use bid document, after made the payment by the
branch main cashier sent the document to the senior accountant at head office for recording
purpose and payroll payment they use the document which is called payroll voucher.

Page 27
Cash payment procedure applied by the organization is complied with accounting standard
and theories. The reason is the organization use internal control method that is segregation of
duty between payment and recording activity and the document used for payment is pre-
numbered.

3.10 Reasons for Cash Payment

The AAWSS made cash payment for the following reasons.

 Payment for expense(i.e. payroll)

 Payment for purchase of goods and services
 Payment for project
 Petty cash payment procedures

The organization assigned the individual branch main cashier to handle petty cash fund. The
head office also has a separate cashier to handle petty cash fund. In the previous years the
individual branch cashier has a petty cash fund of birr 2000 on hand, but in this year this
petty cash fund raised to 5000birr.The organization established the petty cash fund birr
amount of 150000 and send to the branch cashier at the end replenish the petty cash fund
when 1/3 of 15000 birr remaining on hand. In the previous years the branch payment from
petty cash is made if the payment is less than this year it is raised to 500birr.

3.11 How to Made Payment from the Petty Cash Fund

All petty cash payment arise at head office level will be managed by the
disbursement section under the finance department. Before payment is made,
the payment request should submit to finance department and they will
authorize the payment request from and forward to the disbursement section.
The disbursement section senior accountant will prepare a petty cash payment
voucher in two copies. This voucher contains the following information.
 Date of transaction and reference number
 The name of the payee
 Signature of the payee
 A place to record account code
 A place to record debit account
 A place to record credit account
 Prepared by and

Page 28
  Authorized by

After filling the above information properly, the senior accountant will put his signature and
name under the prepared by section. Then he or she forward the petty cash payment voucher
by attaching the relevant payment request from to the finance head and will put signature and
on the authorized by field.

After this the senior accountant will forward the first copy to the cashier and the cashier will
make the payment to the payee. The cashier is also responsible to check whether the payee
properly write his name and put his signature on the space provided, and has to collect a
receipt of payment procedures are looks like this, so in theories also discussed about the petty
cash procedures which are supported the organization procedures.

3.12 Check Payment Procedures

For check payment, the senior accountant or the disbursement section will prepare a check
payment voucher in two copies.

Content of check payment voucher;

 Date of transaction reference number

 The name of the payee
 Signature of the payee
 A place to record accounts code
 A place to record debit account
 A place to record credit account
 Prepared by senior- accountant
 Checked by –finance department
 Authorized b-general manager

After preparing and attaching the payment request and the check to the check payment
voucher, the senior accountant forwards it to the finance department head and general
manager. These two signatory in AAWSS namely finance department head and the general
manager are for control purpose. Therefore both signatories will put their name and signature
on the separate space. In addition to this they put their signature on the check.

Page 29
Finally the senior accountant will record those check payment information on the check
register before issuing the check to the payee. So it clearly shows evidence of endorse the
check. Moreover, the senior accountant also should confirm that weather the payee writes his
or her name and put signature on the payment voucher.

Check payment procedures applied in the organization effective and adequate internal control
over cash because it has adequate segregation of duty in the endorsement process. The
theories discussed about cash payment procedures which are supported that the organization
procedures regarding cash payment.

3.14 How to record petty cash payment and check payment

After the petty cash payment voucher and check payment voucher are properly processed.
The regarding process will be made in the following pattern.

3.15 Recording Petty Cash Payment Vouchers

The recording process of petty cash payment is held at the time of replenishing the petty cash
fund for both the head office cashier and branch main cashier. Cashiers have to prepare and
submit a petty cash summery from the paid cash payment vouchers.

The petty cash summery form contains the following information like:

 Petty cash payment voucher reference number

 Name of the payee and
 Amount paid
 The senior accountant of the disbursement section will prepare
a check payment voucher by attaching the petty cash summery form.
The journal entry will be
Expense ---------------------------------------xx
Cash at bank account----------------------xx

3.16 Recording the Check Payment Vouchers

At the end of every month, the senior accountant of the disbursement section will forward all
check payment vouchers to the accounting department for posting. Before both petty cash
payments vouchers and check payment vouchers are posted to the general ledger accounts,
the accounting department will provide edited list to the disbursement section. Then after the

Page 30
senior accountant checked the detail edited list against each vouchers, then he or she put on
signature on the edited list.

Over time over 500birr using check payment

Over time--------------------------xx

Income tax----------------------------xx

Bank account--------------------------xx

Payroll journal entry will be

Payroll fund-----------------------------xx

Bank account---------------------------xx

After payment

Salary-------------------------xx

Allowance--------------------xx

Pension expense -----------xx

Pensions contribution payable----------xx

Income tax payable-----------------------------xx

Credit association--------------------------------xx

Payroll fund---------------------------------------xx

Finally posting to the general ledgers will be completed based on the confirmed edit list.
Recording petty cash payment looks like this which is complied with accounting standard.

3.17 Existing Cash Control Mechanism

In addition to using those formal payment vouchers and approval procedures, AAWSS
carried out the following mechanism.

3.18 Preparing Bank Reconciliation

The quality control section under the records division is responsible to prepare bank
reconciliations after collecting the bank statements, debit advice and credit advice from each

Page 31
bank. Then a separate reconciliation is prepared for bank accounts or branch offices. The
reconciliation is an important control tool to follow all payments made from bank account
and all collections deposited at the bank account. If there are devotions, the senior accountant
will automatically settle the problem with the bank.

The preparation of the bank reconciliation is more or less adequate which is not prepared
with in fifteen days after the end of the month. The accounting standards stated that
preparation of bank reconciliation should be prepared on time.

3.19 Supervise Cash Count

The internal audit service of Addis Ababa city water supply service will take a supervise cash
count on the hand office cashier and branch main cashiers. Therefore, if there is a different
between the record balance and actual cash count, auditors will immediately report to the
management of the organization. And timely corrective measures will be taken by the
management before big crisis occurs.

3.20 Annual External Audit

At the end of every year the external auditors from audit Service Corporation review the
AAWSSC financial statements. During this process, the bank reconciliation prepared by the
quality control section will be rechecked again and the external auditors. Therefore there is a
second chance to identify and manage errors regarding cash before it is reported on the final
audited financial statements.

CHAPTER FOUR

CONCLUSION AND RECOMMENDATION

4.1 Introduction
This research is conducted to assess the internal control of cash in AAWSS. To make the
research findings more valuable the researcher utilized unstructured interview, questioner and
observation as means of data collection. The researcher analysed and interpreted the
responses secured from the respondents and come up with the following conclusion and
recommendations.

Page 32
4.2 Conclusion

The internal control at AAWSS is strong that it can the organization cash is safeguarded
because of the following reason.

It has been discovered during the study that the organization possesses and update policies
and procedures manual. The analysis part of this study discussed that the organization
possesses and up to date polices regarding petty cash and check payment procedures.

Based on the finding the organization is used pre-numbered documents and document and
adequate segregation of duty and other internal control method .For this reason the
organization control activities over cash are accurate and complete.

The finding section states that there is segregation of duty between different activities but
there is over load tasks in cash collection and deposit activity. However, the organization
duty of segregation is more or less adequate.

There is strong restriction and approval system on check and petty cash disbursements. The
analysis section of this study states that check and petty cash disbursements are strongly
controlled internal control activity.

Based on the finding the organization follows the procedures that after cash collections from
the customer and deposited on daily basis.

Cash receipt and payment journals are posted by some one independent from cash. This also
discussed in the analysis part that the organization recording department which is responsible
for recording of cash receipt and payment transaction and these department is independent
from cash. As stated in the analysis part of the study the cash receipts, petty cash payment
vouchers are pre numbered.

4.3 Recommendation
It is apparent that any organization engaged in any business sector should have an effective
and efficient internal control system to achieve its goals. The internal control system
employed by the firm should also have transparency and accountability. The researcher
focused on the internal control over cash in the case study of AAWSS and come up with the
following pointes among other on which would like recommended.

Page 33
After collection cash from branch cash collectors, the main cashier of the branch has to
deposit the money the same day in the branch bank account. This procedure is clearly
mentioned on the financial manual of the organization. But during the process of discussion
on this matter with the finance manager and senior accountant, the researcher understands
that sometimes the branch main cashier put a lot of money in the safe box which they collect
after the normal bank working hours end. In such case the organization cash may be exposed
to theft at any time. Hence the researcher here by recommends that the organization has to
stop collection before the normal working hours ends.

The organization has a good segregation of duty in finance department, but according to the
researcher observation with one cashiers. Yet both the cashiers have not been included in the
segregation process. Thus, it is recommended by the researcher that the organization should
also implement the job segregation process in cash offices as well, but if tasks related cash
are too much are should be carried out only by cashier, then the firm need to employee
additional cashiers. Unless their wise, intentional and unintentional acts may takes place and
can possibly affect the company as a whole and cash in particular.

The organization system utilizes system software (computerized accounting system)to

accomplish its accounting tasks. Thus, it can be a good factor which indicates that the firm is
in advancing in technology. Thus, this should be maintained.

Page 34
REFRENCES

D.P. Jain.(1993).Auditing. First Edition. Pakistan Karachi. Konark publishers Pvt. Ltd

Frank J. Fabozziseries.(2003).Financial Management and Analysis, Second Edition.

Canada. Johan Wileyand son.s,inc

I.M. Pandey.(1999). Financial Management. Eight Editions. Delhi. Vikas Publishing

house Pvt.Ltd

Johannes Kinfu.(2003) Introduction to Principles and Practice of Auditing, First

Edition.

R.G.Saxena (2001), Principle and practice of auditing. Fifth edition. Bombay. Himalaya
publishing house..

Rittenberg&Schwieger.auditing concepts for a changing environment, fourth edition.

(Www. Admin.mtu.edu/acct/dept…..)

(Www.finance.ubc.ca/ra/petty cash procedure.cfm)

(Www.smced.educlaccount)

Page 35
Section-I General Questions
The following questions are prepared to get general information. Please respond
by putting (√) or writing
Please indicate your:
1. Current position in your
organization:_____________________________________________________

2. Field of study:

( ) Accounting, ( ) Management, ( ) Economics, ( ) Others

(specify)________________________________________________________.
3. Level of education:

( ) Technical/vocational school certificate, (college/ University diploma, ( )

Bachelor’s degree, ( ) Masters degree ( ) Others (specify)______________

4. Please indicate your years of experience as an internal control of cash

1-5 ( ) 6-10 ( ) 11-15 ( ) 16-20 ( ) Over 20 years ( )

5. When do you join the organization as an internal control?

Before the reengineering ( ) During the reengineering ( ) After the
reengineering ( )

Page 36
 Before reengineering After reengineering

A. Organizational setting SA A N D SD SA A N D SD

1. The purpose of internal control is clearly defined…… () () () () () () () () () ()

2. Internal control has policies for hiring internal control staff…… () () () () () () () () () ()

3. Internal control has policies for training of internal control () () () () () () () () () ()

staff…..

4. There is complete control cash manual to guide internal () () () () () () () () () ()

control….

5. Internal control department is large enough to successfully carry () () () () () () () () () ()

out its duties…………………….

6. The internal control staffs possess knowledge and skills in a () () () () () () () () () ()

variety of area (beyond accounting and finance) as necessary………

7. cash control is free from intervention in performing its duties….. () () () () () () () () () ()

8. Internal controllers feel from to include any cash findings in their () () () () () () () () () ()

controlling

9. Internal control obtains sufficient budget to successfully () () () () () () () () () ()

carry out its duties…………………………….

Before the reengineering After the reengineering

A. Internal control quality SA A N D SD SA A N D SD

Page 37
10. Internal controllers possess sufficient experience to () () () () () () () () () ()
understand the organizations system

11. Adequate short tern training is arranged for internal () () () () () () () () () ()

controllers each year

Seldom
Scope of internal control work

Always

Sometimes

Always

Sometimes
Often

Often

Seldom
Never

Never
How often does internal control conduct the following
activities?
13. Check adequacy of the cash’s record () () () () () () () () () ()

14. Verify accuracy of amounts in financial records () () () () () () () () () ()

15. Review information contained in reports of operating () () () () () () () () () ()

departments

16. Review the systems for safeguarding of assets () () () () () () () () () ()

17. Evaluating the internal control system and making () () () () () () () () () ()

recommendations for improvement

18. Performing cash of major fraud cases () () () () () () () () () ()

19. Checking efficiency of operating results () () () () () () () () () ()

20. Ascertaining compliance with organizational policies and () () () () () () () () () ()

procedures

21. Checking compliance with external laws and regulations () () () () () () () () () ()

when applicable.

22. Ascertaining that operating objectives are consistent with () () () () () () () () () ()

organizational goals

23. Ascertaining that operating procedures are consistent with () () () () () () () () () ()

the operational goals

24. Reviewing operations to ascertain they were implemented () () () () () () () () () ()

as intended…

25. Assisting the management by identifying risk exposures of () () () () () () () () () ()

the organization…..

26. Providing consulting services to management where () () () () () () () () () ()

internal control has the expertise……………

control planning

27. Annual internal control plan is prepared………………………. () () () () () () () () () ()

28. Internal control work is documented and maintained in a () () () () () () () () () ()

file of control working papers…………..

Page 38
29. Risk assessment is done as part of control planning () () () () () () () () () ()

Communication

30. Internal audit provides reports to the board of directors (or () () () () () () () () () ()

audit committee)…………….

31. Internal auditors follow-up implementation of corrective () () () () () () () () () ()

actions relating to audit findings

32. Audit findings are discussed with auditee’s before being () () () () () () () () () ()

reported on..

Before the reengineering After the reengineering

Management support SA A N D SD SA A N D SD

33. Management take timely corrective action based on () () () () () () () () () ()

internal audit recommendations…

34. There is higher management commitment to strengthen () () () () () () () () () ()

the internal audit department…

35. Internal auditors receive full cooperation from auditee () () () () () () () () () ()

(the unit being audited)…………………..

36. Internal auditors have full access to records and () () () () () () () () () ()

information they need in conducting audits.

Part III- Open ended question

How do you explain the change as a result of Business process reengineering in internal audit
function?

__________________________________________________________________________________
__________________________________________________________________________________
________________________________________.

Additional
Comments_________________________________________________________________________
__________________________________________________________________________________
___________________________________________.

Page 39
Page 40