Accounting Information Systems: The Processes and Controls, 2nd Edition

RISKS AND CONTROLS IN THE CASH COLLECTION PROCESSES (STUDY OBJECTIVE 4, continued)

We now turn our attention to specific internal controls and related risks associated with cash collections from sales revenues. Some internal controls present within a cash receipts process are as follows.

AUTHORIZATION OF TRANSACTIONS

Appropriate individuals should be assigned responsibility for opening and closing all bank accounts and approving bank deposits or electronic transfers of funds. This ensures that records are updated only for authorized transactions.

SEGREGATION OF DUTIES

As you know, authorization duties (described previously) need to be kept separate from recording and custody duties. Recording responsibilities include maintaining a cash receipts journal, updating accounts receivable records for individual customers, and posting subsidiary ledger totals to the general ledger. Custody responsibilities include opening mail, preparing a list of collections, handling receipts of currency and checks, and preparing bank deposits. At minimum, those who handle cash should not have the authority to access the company's cash or accounting records or reconcile the bank account. In addition, those with responsibility for information systems programming or control should not also have access to the cash or accounting records. Furthermore, anyone responsible for maintaining detailed records for daily cash receipts or accounts receivable subsidiary accounts should not also have access to the general ...