Techniques to Assess the Integrity of Cash Reporting
Cash in bank is the most important asset of a company for obvious reasons. Without it, operations come to a complete halt. We all know the importance of this account and in this article, I would like to highlight some procedures to assess the integrity of cash reporting. Techniques such as reviewing bank activity, daily processing procedures, and bank reconciliations in addition to a proof of cash will lead to the proper assessment of cash reporting. I will discuss the following techniques in more detail in the subsequent paragraphs.
Bank Activity
The accountant, controller or office manager should obtain a report of the bank activity from the date of the last bank reconciliation through today. This should be performed regularly as an internal audit function. This report can easily be obtained via the bank logon. The report should show deposits and other additions as well as checks presented for payment, withdrawals and other subtractions along with a running balance.
Review the activity for the following items:
- Have any deposits been returned by the bank? Why were they returned? Has the returned deposit been posted to the general ledger? Have we contacted the payor to make good on the payment? Has the payor made good on the payment since contact?
- Has the company issued any checks that were not honored by the payee’s bank? Why were the company’s checks not honored? Has the bounced check been posted to the general ledger? Has the company made good on the payment to the payee?
- Has there been any major fluctuations in the daily balances or overdrafts? If overdrafts have occurred, it is important to immediately investigate the cause and take corrective and preventative measures by modifying daily processes and procedures.
- Perform the same review noted above for accounts with minimal activity and or zero balance.The answers to the questions above may shed light on brewing issues and trends, taking action to correct and prevent issues will lead to proper cash reporting.
The answers to the questions above may shed light on brewing issues and trends, taking action to correct and prevent issues will lead to proper cash reporting.
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Sebastiano Banchitta T (732) 379-5215 [email protected]
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