Assessment of Internal Controls in Cannon Pty Ltd

The internal controls of Cannon Pty Ltd have several weaknesses, including a lack of clear daily operating procedures for cash receipts, inadequate segregation of duties, and a reliance on manual accounting systems. This increases the risk of errors and fraud in the company's cash receipt system.

1
Internal Controls
Name:
Course
Professor’s name
University name
City, State
Date of submission

2
Audit
Strengths and weaknesses in the internal controls of Cannon Pty Ltd
The internal controls of Cannon Pty Ltd does not have clear daily operating procedures
that are meant for the cash receipts. This is one of the weaknesses in the internal controls of the
cash receipts. The company relies heavily on people who are the sales representatives to get
cheques from customers. The problem with this is that the cheques can be easily misplaced
which is a big problem to the company (Graham, 2008). Another weakness is that a lot of roles
have been delegated to the credit control clerk, that means that there is no proper separation of
duties. For example, after receiving the checks, she is the one who is responsible for crossing
them so that they can be banked, she the enters the cheque details into the system then she prints
the daily report afterwards. This means that if she makes an error, no one will be able to know
that an error has been made. She also handles the banking part of it as well as preparing the bank
slips.
The company should delegate some of these duties to another person in the finance
department to ensure that there is accuracy in the process, someone to countercheck. Another
weakness is that it clearly shows that the company has not put in place measures to ensure that
there is timeliness of payment by the customers. Some of the strengths of the internal control
system is that the company makes daily cash receipts reports this means that the reports are
always up to date.
b) Implications of the weaknesses

3
segregation of duties: the various duties in cheque handling should be performed by different
people. There should be no instance where one person in the company handles all those duties.
The implication of this weakness is that the company will deal with so many errors and also
there is the risk of many more errors occurring. There is also a risk of fraudulent activities in the
cash receipt system when the company allows sales representatives to receive payments on the
company’s behalf. Payments in cash or cheques should be received by specific people which
minimizes the risk of fraud in the company (Montgomery, 2013).
The company relies on mostly manual accounting system instead of an computerized accounting
system. The imp0lications of this weakness is that there are a lot of errors that are made by
manual accounting system.
Assessment of internal control for cash in Cannons cash receipt system
The Internal Control of cash is aimed at reducing errors and losses within the Organization,
comprises the following accounts. Here are some of the internal control measures you can take to
reduce these errors:You must take a strict control over the collections made by the collectors,
who at the end of the day they deliver the money received from the client along with uncollected
bills.
It comprises a whole series of administrative measures, so that certain operations are executed by
two or more persons, with the deliberate purpose of avoiding errors, hinder eventual malicious
handling and detect irregularities in time.

4
In principle, it is relatively easy for a single person to commit fraud; but when it has to act in
conjunction with another person, who controls it, it is more difficult; making the possibility more
remote, the greater the number of people involved (Wong and Ho, 2006).
There is a fundamental principle of "internal control of cash", which requires that the functions
of management of the same are made by people other than those who are responsible for their
registration.
This principle must be completed with that of labor, which executes a person, be formally
verified and controlled by another person.
In short, the fundamentals of internal control of cash can be summarized in the following
principles:
a) That the person who handles the "Cash"; whether it covers, or pays, does not has access to the
accounting records thereof.
b) Conversely, whoever registers operations with the "Cash" does not have access to the money.
c) Split the work between several people, so that any error, omission or fraud can be discovered
in time; and that, in order to commit the latter, there must be collusion of several persons.
d) Whoever covers, does not be the same one who pays.
e) That all money, which enters the company, is in its entirety deposited in his account bank.

5
f) All payments, absolutely all, are made by checks. Only the small payments are made in Cash;
but through the
g) Whoever collects, should not be the same person who issues corresponding receipt, and must
be another person, who carries out the respective accounting record.

6
References
Graham, L. (2008). Internal controls. Hoboken, N.J.: John Wiley & Sons.
Montgomery, R. (2013). Auditing. [Place of publication not identified]: Theclassics Us.
Wong, L. and Ho, T. (2006). Auditing. Hong Kong: Hong Kong Institute of Accredited
Accounting Technicians.