Home » INTERNAL AUDIT

Transfer of Cash from cash book

25 February 2009 2,227 views 3 Comments

Dear Expert, Kindly give me your views on how one can deal with the following internal audit situation:

During the review of the company bank reconciliation an internal auditor discovers that the reconciliations are not up to date for more than a year which of course increases the risk of fraud. So the auditor decides to review the system of receipting , recording and depositing cash sales. A lot of frauds are discovered relating to posting of payments to debtors and understating of bank deposits.

Some months later the finance manager writes off about 61% of receipts from the credit side of the cash book without any raising J.Vs or investigating the cause of the “overstatement” of the cash book.later on another write off of about 60% of monthly cash sales was effected again. All these issues were not brought to the attention of internal auditor when they were investigating frauds. They were just discovered when they were reviewing the cash book for large credit adjustments. During Audit interview with the finance director, the finance director casually and proudly confirms that she is aware of that adjustments and said it is normal accounting practice to make such adjustments.

Meanwhile the company just dissolved the board and appointed new directors but from the time they were appointed they have never had a meeting with internal auditor. Also the former audit committee left a lot of issues relating to frauds unresolved and they actually never took a keen interest in them. meanwhile the finance director has not been willing to implement audit recommendations from internal auditors and the company continues to experience frauds and continues to operates in a very poor control environment.

Now in the midst of all these issues and also bearing in mind that an internal auditor does not have enough protection from any source at present and so may fear to be sucked, how can the auditor handle these issues in the best interest of the company and in accordance with accounting ethics without putting his life in danger?

Benaya

Related Posts

  1. IAS 7- Statement of Cash Flows & Foreign exchange gains/losses
  2. Non Profit Agency and Auditing
  3. audit engagement contract, non-profit non-stock entity
  4. Cash and cash equivalents
  5. Audit Informationa Hotel (Hospitality) Project
  6. Cash basis – accrual basis
  7. Internal audit report
  8. Transfer of shares (USGAAP)
  9. Cash/tax
  10. IFRSLIST.COM | Last 12 month cash flow
1 Star2 Stars3 Stars4 Stars5 Stars (1 votes, average: 4 out of 5)
Loading ... Loading ...

3 Comments »

  • asadlarik3 said:

    though i have not started auditing yet but this is just a casual reply

    i have heard this for the first time write off from the CASH account!

    cash is certainly recorded when it is received the only problem can be that of bank reconciliation which is also quite attainable
    so the only discrepancies will be the misappropriations, dummy sales also may be.

    So you all would have certainly got all the exact details of misappropriations and would have formed the report so why not send it to chief executive, if you think none in company will respond you may go to your companies regulatory body you also have the courts open

    These all are options are open decision would be yours based on your situation and preferences
    take other colleagues of your and other departments in confidence

    wait for the external auditors to arrive! but before it discharge your responsibilities

    i think the best think to do will be to reach the new directors and present your report.

    be assured that there is nothing for you to fear of. these are just professional matters and these are to be dealt with every now and then

    # 25 February 2009 at 4:38 pm
  • admin (author) said:

    Message from Ally:

    The answer here is very simple, if the Board of Directors is not able
    to ask and scrutinize on these issues mean ita has failed to perform
    its part bucause its responsibilities are the Preparations of F/
    Statements in accordince of the relevant Standards as well as
    ensuring that there is proper and strong Internal Control System
    within the Organization.

    You as an Audito, and a human being will not be able to provide an
    assurance of Internal Control System unless there is support from
    other team members as well as the Board od Directors.

    As far as the Audit Code of Conduct is Concerned my advise is that you
    better find an alternative working place rather staying there cause
    will impair your professionalism as well as comptence.

    Thanks and regards,

    Ally

    # 26 February 2009 at 5:10 pm
  • admin (author) said:

    Message from William

    Hi Benaya,
    I have another suggestion. It’s true as Ally said that this situation is affecting your professional stance. But rather than leaving the job now, I advise that if there is no support from the higher level (management, board, etc), document your findings and the entire situation. Discuss it with your trusted colleague-one or two of them. You could disclose all your documentation to the external auditor if they are trust worthy and ethical during and audit engagement/fieldwork.

    However, remember to brace yourself just in case of any eventuality that will lead to your dismissal/resignation. Even if you are dismissed ensure that you keep copy of the documentation of the entire situation. Update the document as things unfold.

    Otherwise if you decide not to do that go ahead and resign specifying in your letter of resignation the exact reason for resigning.
    Hope this help.

    William

    # 26 February 2009 at 6:13 pm

Leave your response!

You must be logged in to post a comment.