AUDITING SUBSIDIARIES

Setting of periodic control reports to assist the Local and Traveling

Manager, of each medium and small size companies of the Group, to
better control their Companys cash in and out transactions
A great number of subsidiaries have systems with common
vulnerabilities and exposures (e.g. lack of data integrity controls,
lack of audit trails etc.)
There is a tendency to have segregation of duties in many areas
due to the small size of the Company and the limited number of
personnel this is often the case with the Accounting Department
There are often local
interpretation issues

constraints

such

as

translation

and

Information that needs to be checked is voluminous and the

auditor is expected to perform the audit in a limited period of time

WHAT TO DO & WHERE TO LOOK

PERFORM A CASH AUDIT
-Cash Count & Bank Reconciliations: Bank Statement
transactions, cashier reconciliation should be properly
reconciled with Companys Trial Balance and P&L accounts.
-Cash Statement : Cash Statement is a control report between
2 points in time (i.e. 2 consecutive months) grouping
incoming and outgoing money transfers per type of
transaction (i.e. deposits through customers, payroll payment
etc.) and mode of transaction (i.e. electronic payment, deposit
in the cashier, etc.).
-AR & AP Reconciliations: In addition to the Cash Statement
two additional reports can be prepared that would further
assist the review of the Companys operations within the set
period of a month.

HOW TO DO IT - CASH STATEMENT

BUSINESS ACCOUNT
CASH-IN
Sales Advances:

CASHIER
bank deposits
cash to plant cashier

BANK
1
2

Sales Collections
Other:
CASH-OUT
Expenses:

Expense Advances:

Wages (transfer of total):

Other :
Bank Charges:
Taxes:
Money Transfers to sec.
Account:

3
Int. Income, Return of Deposit, Loan,
Insurance Claim etc

cash cheques
cash from plant
transfer cheques
remittance
cash cheques
transfer cheques
remittance

5
6

transfer cheques

NOTE: NUMBERING SHOULD BE USED FOR THE GROUPING OF TRANSACTIONS PERFORMED

THROUGH THE BANK OR THE CASHIER

7
8
9
10
11
12
14
15
16
17

Accounts Receivable
Reconciliation of A/R Balances : All movements related
to the Order to Cash operations should close the equation:
A.R.0 = A.R.-1 + S0 C.N.0 W.O.0 - C.S.0 COLL.0 ADV.0.
ACCOUNTS RECEIVABLE
From Cash Statement
A/R at the end of May 2010
A/R at the end of April 2010
(+) SALES
(-) COLLECTIONS
(-) ADVANCES FROM
CUSTOMERS
(-) CASH SALES
(-) CREDIT MEMOS
(-) WRITE OFFS
(-) OTHER

(3)
(1)+(2)
(3)

A/R

Accounts Payable
Reconciliation of A/P Balances : All movements related to the
Purchase to Pay operations should close the equation:
A.P.0=A.P.-1 + PUR.0 ADV.0 EXP.0. WO.0 PAYM.0 C.N.0 ADV.0.
ACCOUNTS PAYABLE
From Cash Statement
A/P at the end of May 2010

A/P at the end of April 2010

(+) INVOICES
(-) EXPENSES
(-) ADVANCES TO
(-)OTHER

(5)+(6)+(7)+(8)
SUPL.

(9)+(10)+(11)
(12) To (17)

A/P

THE 3 CONDITIONS
1. Have pre-prepared

Cash Statement

A/R Reconciliation

A/P Reconciliation
Directly from the Accounting Software

2. Min specs for Software

(e.g transaction coding)

3. Secure GMs Participation

The closer involvement of local Manager in day-to-day affairs
through supporting the setting up of pre-prepared reliable
control reports to assist in the control of money coming in
and out is essential

PROBLEMS
- Existing reports prepared manually thus the
manual method is prone to errors
- Not possible to extract data directly from the
Companys system
- Lack of proper transaction codes in the Companys
system to describe transactions
- Batch payments (i.e. 1 group payment for many
suppliers appearing in bank statement and/or
ledger as one transaction)