Lesson: Auditing the Cash Cycle

In this lesson, Nick Palazzolo, CPA, covers the importance of segregation of duties and internal controls in auditing the cash cycle. He explains how properly designed internal controls can help avoid misappropriation and issues such as double payments, fake invoices, and forced sales. Examples of well-designed internal controls include having the monthly bank statements reviewed by an independent auditor, requiring the voucher payable bookkeeper to match vendor invoices with corresponding purchase orders and receiving reports, and the treasurer canceling vouchers and mailing checks to vendors. Nick also addresses the issue of improperly designed internal controls, such as a cash disbursements bookkeeper who both maintains cash records and has access to blank checks and signature plates.