Cash presents unique risks and internal control issues due to the high liquidity

Question

Cash presents unique risks and internal control issues due to the high liquidity and high volume of transactions. We all make purchases at retail outlets, probably several times each week. Think about your recent purchases at a gas station, grocery store, movie theater, restaurant, etc. Pick two of your recent cash (debit/credit, check, etc.) transactions. • Discuss both the risks presented in processing your transactions as well as the controls you noticed (or would expect to find) in those establishments to safeguard your purchase

Explanation / Answer

Answer:

Cash transatins are really risky and it requires lot of internal controls to cope up with potential circumstatces of it been misapplied or misused.

I would like to discuss the two of my transactions where cash was involved :

1) One nvolves payment at movie theatre for tickets and

2) The other is payment for the food biils at the restaurment.

Movie Theatre :

Risks presented Controls noticed (or would expect to find)

Income not recorded but already received 1) Pre-numbered receipts were being issued

2) Authenticated records of income could have been maintained

3) Rotation of staff could have been there.

Theft /Steal 1) Cash was taken and put into the box kept for it.

2) Access of the box was only limitied to few persons.

3) Cash balance could have been checked at regular intervals with the income recorded.

Illicit activities by employees 1) Surveillience cameras were intsalled to have a look at the staff working

2) Passwords to have an access to the computer systems must have been known to the authorized person and transfer codes should have been properly encrypted

Restaurant :

Risks presented    Controls noticed (or would expect to find)

Unauthorize use of checks/Cash 1) Cash/Checs were kept in a safe box.

2) Only cashier was authorize to handle cash/checks.

3) Recording of cash was done instantly in the computer systems Duplication of invoices/orders    1) There must have been regular checkings for the Issued duplication of the invioces or invoice book used.

   2) Check for the orders placed and the invoices issued according to the data in the order book.

Documentation check 1) Proper checks were there for the coupon used for availing offers.

2) Proper checks were there for the use of debit/credit cards

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