Internal Check Regarding Cash Receipts and Cash Payments

Internal Check Regarding Certain Transactions: Cash Receipts and Cash Payments

Cash is the asset most vulnerable to misappropriation, precisely because it is easy to move,

difficult to trace once it changes hands informally, and directly convertible to personal use.

The syllabus specifically calls out internal check arrangements for cash receipts and cash

payments as the standard worked illustration of how the general principles above apply in

practice.

Internal Check regarding Cash Receipts — key features of a sound system:

1. Segregation of duties: the person who actually RECEIVES cash/cheques should be different from the person who RECORDS the receipt in the cash book, who should again be different from the person who ultimately BANKS the money.
2. Immediate, pre-numbered documentation: every cash receipt should be immediately acknowledged with a serially pre-numbered receipt/counterfoil, so a gap in the sequence is instantly visible.
3. Daily banking of receipts, in full and unaltered: all cash and cheques received during the day should be deposited into the bank the same day (or the very next working day) in the exact form received — nothing should be paid out of the day's cash collection directly without going through the bank first (this closes off the common fraud of quietly "borrowing" from the day's takings before banking them).
4. Mail-received cheques opened by two persons together, with an immediate list prepared (so no single person alone controls what actually arrived by post).
5. Independent cross-verification: the total of cash actually received (per the cash register/counterfoils) is periodically reconciled against the bank pay-in slip and the entries in the cash book, by someone other than the person who received or recorded the cash.
6. Surprise cash counts by a senior official/supervisor, at unannounced intervals, to verify the physical cash on hand matches the books.

Internal Check regarding Cash Payments — key features of a sound system:

1. No payment without proper authorisation and supporting voucher: every payment must be supported by a duly authorised, properly evidenced voucher/invoice BEFORE payment is made, never after.
2. Segregation of duties: the person who authorises a payment, the person who prepares the cheque/payment, and the person who actually signs/releases the payment should ideally be three different individuals (or at minimum, authorisation and signing kept separate).
3. Payments made by cheque/bank transfer wherever practicable, rather than cash, since a cheque/transfer leaves an independent, bank-verified paper trail that a cash payment does not.
4. Vouchers cancelled/stamped "PAID" immediately after payment, so the same voucher cannot be presented and paid a second time.
5. Two signatories required on cheques/payments above a specified value, so no single individual can authorise a large payment alone. …