Internal Controls Proposal
Consulting Firm Inc. has been hired to review Auto Parts Inc. company functions. The consulting firm reviewed the cash, sales, accounts receivable, inventory and production functions. Based on this review, the consulting firm has prepared a proposal of internal controls for each function of the company. This proposal will give a background of each function and a list of the proposed internal controls.
Cash
Auto Parts Inc. manufactures and sells auto parts to car dealerships as well as the general public. Cash receipts come in the form of credit card, electronic payments, cash and check. Very little cash or check is received through the mail however there may be one or two orders through the mail. The company receives cash at their store location from customers and electronic payments from the dealerships on a daily basis. The sales department is responsible for sales to the dealerships. Cash is not received at the manufacturing plant. However there is a petty cash fund at the plant for incidentals. Cash disbursements are made to purchase supplies and inventory and for daily operations of the plant and store. In order to prevent errors and fraud, the following controls have been proposed for the cash receipt and disbursement process.
Cash Receipts
7 When cash/checks are received in the mail, two people should open the mail.
8 All checks should be endorsed immediately.
9 A list of the cash receipts should be prepared immediately.
10 All cash/checks will go to the cashier’s office where the deposit slip is prepared.
11 Deposits are made daily by 2pm. Any cash receipts that come in after that time is kept in a locked safe until the next day. The supervisor and the lead cashier are the only persons with the key.
12 The list of the cash receipts and remittances will be sent to accounting to be recorded.
13 For receipts at the cash register, the drawer will be counted at the beginning of the cashier’s shift and again at the end. There will be $100 kept on
Cash
Auto Parts Inc. manufactures and sells auto parts to car dealerships as well as the general public. Cash receipts come in the form of credit card, electronic payments, cash and check. Very little cash or check is received through the mail however there may be one or two orders through the mail. The company receives cash at their store location from customers and electronic payments from the dealerships on a daily basis. The sales department is responsible for sales to the dealerships. Cash is not received at the manufacturing plant. However there is a petty cash fund at the plant for incidentals. Cash disbursements are made to purchase supplies and inventory and for daily operations of the plant and store. In order to prevent errors and fraud, the following controls have been proposed for the cash receipt and disbursement process.
Cash Receipts
7 When cash/checks are received in the mail, two people should open the mail.
8 All checks should be endorsed immediately.
9 A list of the cash receipts should be prepared immediately.
10 All cash/checks will go to the cashier’s office where the deposit slip is prepared.
11 Deposits are made daily by 2pm. Any cash receipts that come in after that time is kept in a locked safe until the next day. The supervisor and the lead cashier are the only persons with the key.
12 The list of the cash receipts and remittances will be sent to accounting to be recorded.
13 For receipts at the cash register, the drawer will be counted at the beginning of the cashier’s shift and again at the end. There will be $100 kept on