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INTERNAL AUDIT PROGRAM FOR BUSINESS

DESCRIPTION: BEFORE AN AUDITOR SETS OUT TO AUDIT A CLIENT, HE DEVELOPS AN AUDIT PLAN. THROUGH MANY YEARS OF EXPERIENCE, AUDITORS HAVE DEVELOPED AUDIT PLANS OR MORE COMMONLY AUDIT PROGRAMS, THAT ARE EFFECTIVE IN IDENTIFYING WEAKENESSES IN A GIVEN AREA. THIS MANUAL HAS AUDIT PROGRAMS OF THE MOST CRITICAL AREAS IN A BUSINESS. THESE AUDIT PROGRAMS ANALYZE THE INTERNAL CONTROLS OF ENTERPRISE. CONTRAST THISTO THE EXTERNAL AUDITORS FROM A BIG CPA FIRM WHO COME TO A FIRM AND AUDIT THE FINANCIAL STATEMENTS. THAT IS TERMED EXTERNAL AUDITING. INTERNAL AUDITING IS FAR MORE USEFUL TO MANEGEMENT THAN IS EXTERNAL, AS IT PROVIDES MANAGEMENT WITH A COMPREHENSIVE SUMMARY OF THE INTERNAL WORKING OF THE ENTERPRISE.

INTERNAL AUDIT PROGAMS

ISBN: 1-877767-16-6
AUTHOR: LYNN GROBIN
PRICE: $24.95

EXCERPT:

Petty cash: A petty cash fund is used to facilitate purchases of necessary items by a business without the time delay and expense involved when the purchasing department places the order. Since Purchasing has many built in controls, from an internal control perspective, it is preferable to have them do all the buying. However, there are emergencies, or perceived emergencies that necessitate an immediate response. The compromise usually is that immediate cash can be had for emergencies, but the amount is quite small, perhaps $100 or less.
    In many companies, the cost of Purchasing preparing a purchase order exceeds $100, so petty cash can be cost effective. The problem arises in that sloppy control is often maintained over these small amounts. All disbursements from the fund should be documented, and receipts showing the amount of the purchase should be kept with the funds as soon as the buyer returns from the vendor, or at the earliest possible convenience. At any time, the amount of receipts plus cash and IOUs should equal the authorized amount of the fund. Usually, when the fund reaches a predetermined floor, the receipts supporting disbursements from the fund are given to Accounting, and the fund is replenished. The approval to replenish the fund must come from an official who does not have the occasion to disburse monies out of the fund.
    It is easy for this area to degenerate as scheming employees seek a source of quick funds. If they are restricted to a ceiling of say, $100 at a time, they may purchase $300 worth of merchandise in $100 installments. Personal check cashing may lower the level of the fund to a point where it is unable to meet the needs for which it was originally created.
    The best prices may not be obtained with petty cash funds. The Purchasing Department is supposed to find the vendor with the lowest price, all other factors being equal. When an employee needs an item, he is not concerned with the cost-only with getting the item as soon as possible.
Audit Program:
1. Are all disbursements from the petty cash fund supported by adequate documentation?
2. Are requests for reimbursement of the fund supported by details of disbursements and related supporting documentation?
3. Is petty cash used only for very small purchases and bona fide emergencies so that the Purchasing Department and its related controls is not circumvented?
4. Are reimbursements to the fund approved by an official who is not a custodian of the funds?
5. Is a reconciliation made periodically between the petty cash fund and the accounting records?
6. Are there limits on the size of expenditures, loans, advances, and the cashing of personal employee checks?

TABLE OF CONTENTS

BANK BALANCES
PETTY CASH
ACCOUNTS RECEIVABLE
CHECKING ACCOUNTS
MATERIALS AND SUPPLIES INVENTORIES
INVENTORY COUNTS
PROPERTY, PLANT AND EQUIPMENT
ASSET VERIFICATION
PURCHUSE ORDER
RETURNED GOODS
ACCOUNTS PAYABLE
WAGES AND SALARIES
GENERAL LEDGER ENTRIES
PERSONAL COMPUTERS
COMPUTER SYSTEMS
BUDGETING
BLANK AUDIT FORMS