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    Caterpillar Co.: Key Control Test of Control

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    Pink Girl
    Caterpillar Co. has internal controls over cash receipts including ensuring cash is recorded correctly, safeguarded from theft, and recorded in the proper accounting period. The internal audit department reviews cash controls at stores and found no exceptions after visiting the largest 20 stores. Daily cash is reconciled and discrepancies are noted. Cash is transferred daily to the bank by a security company. However, there are some control deficiencies including only auditing the largest stores, all employees using the same tills, employees serving friends/family, aggregate reconciliation of tills, cash being stored overnight in shops, and lack of segregation of cash duties. Recommendations are provided to address these deficiencies.

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    Caterpillar Co.: Key Control Test of Control

    Uploaded by

    Pink Girl
    612 views2 pages
    Caterpillar Co. has internal controls over cash receipts including ensuring cash is recorded correctly, safeguarded from theft, and recorded in the proper accounting period. The internal audit department reviews cash controls at stores and found no exceptions after visiting the largest 20 stores. Daily cash is reconciled and discrepancies are noted. Cash is transferred daily to the bank by a security company. However, there are some control deficiencies including only auditing the largest stores, all employees using the same tills, employees serving friends/family, aggregate reconciliation of tills, cash being stored overnight in shops, and lack of segregation of cash duties. Recommendations are provided to address these deficiencies.

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    acca aa f8 audit

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    Caterpillar Co

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    Caterpillar Co. has internal controls over cash receipts including ensuring cash is recorded correctly, safeguarded from theft, and recorded in the proper accounting period. The internal audit department reviews cash controls at stores and found no exceptions after visiting the largest 20 stores. Daily cash is reconciled and discrepancies are noted. Cash is transferred daily to the bank by a security company. However, there are some control deficiencies including only auditing the largest stores, all employees using the same tills, employees serving friends/family, aggregate reconciliation of tills, cash being stored overnight in shops, and lack of segregation of cash duties. Recommendations are provided to address these deficiencies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    612 views2 pages

    Caterpillar Co.: Key Control Test of Control

    Uploaded by

    Pink Girl
    Caterpillar Co. has internal controls over cash receipts including ensuring cash is recorded correctly, safeguarded from theft, and recorded in the proper accounting period. The internal audit department reviews cash controls at stores and found no exceptions after visiting the largest 20 stores. Daily cash is reconciled and discrepancies are noted. Cash is transferred daily to the bank by a security company. However, there are some control deficiencies including only auditing the largest stores, all employees using the same tills, employees serving friends/family, aggregate reconciliation of tills, cash being stored overnight in shops, and lack of segregation of cash duties. Recommendations are provided to address these deficiencies.

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    Caterpillar Co.

    a)
     To ensure all cash receipts are recorded in the cash book.
     To ensure cash is safeguarded to prevent theft.
     To ensure cash receipts are recorded in the correct accounting period.
    b)

    Key Control Test of Control


    Caterpillar Co has an internal audit Review the Internal audit file to confirm
    department which that the 20 stores were visited and for
    has undertaken a number of internal exceptions noted and actions taken.
    control
    reviews specifically focusing on cash
    controls at
    stores during the year.
    The existence of an internal audit
    department reduces the risk of fraud
    and will ensure the stores adhere to the
    policies and procedures.
    At the end of each day, the tills are Discuss with the store manager about
    closed down with daily readings of sales the discrepancies identified and the
    taken from each relevant follow up action taken to
    till. These are reconciled to the total of resolve.
    the cash in the tills and the credit card
    payment slips
    and any discrepancies are noted.
    If there is any discrepancy that can be
    identified on a timely basis and reduce
    the risk of fraud as employees are
    aware that the assistant manager will
    perform reconciliations.
    The cash is received by sales is Observe the process being carried out
    transferred to the bank via collection by by the security company.
    a security company.
    This ensures cash is safeguarded and
    the risk of theft during transfer is
    minimised.

    c)

    Control deficiency Recommendation


    Caterpillar Co has 45 stores out of
    which only the largest 20 stores are The IA should visit every store on at
    visited by the IA dept. least once annually.
    There is a risk that the other 25 stores
    might not operate effectively and errors
    may go undetected since they know
    that they will not be visited by the IA
    dept.
    All employees based at the store are Only employees with log on codes
    able to use each till and individuals do should be able to use, and each
    not employee should have a designated till
    have their own log on codes, although
    employees tend to use the same till
    each day. Allowing all employees to use
    all the tills will make locating error
    difficult.
    Where employees’ friends or When a friend/family of an employee
    family members purchase clothes in comes to the store an unrelated
    store, the employee is able to serve employee should serve and a supervisor
    them at the till point. should ensure appropriate amount is
    There is a risk that the employees might charged.
    give their friends/family undue
    discounts which will have a negative
    effect on the company
    To save time, this reconciliation is done For better control purpose, the assistant
    by the store’s manager should reconcile the sales day
    assistant manager in aggregate for all of book with the total cash separately for
    the store tills together. each till.
    Reconciliation of all the tills together
    will make identifying errors and
    discrepancies difficult.
    , the cash is stored in the shop’s small The cash should be banked on a daily
    safe overnight . basis but should be at the time the store
    The cash is at risk of theft. closes.
    The clerk is responsible for a numerous The responsibilities should be split
    elements o the cash system. between different individuals.
    There is lack of segregation of duties,
    which increases the risk of fraud and
    timely identification of errors

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