Researching of the Effectiveness of Control Methods

Subject: Management
Pages: 1
Words: 324
Reading time:
2 min
Study level: Master

Initial assessed control risk, tests of control, tests of transaction for cash disbursements, and tests for details of cash balances are all used to evaluate the effectiveness of control methods utilized in the company. The compilation of results helps to deepen the analysis of a system within the company, circumstances, events, and interactions and shows the company’s weaknesses (Ramadiyansari & Sasongko, 2020). According to Ramadiyansari and Sasongko (2020), a lack of testing could lead to mismatches in the company’s functions and workflow and eventually result in inaccurate information for decision-making processes. Moreover, as frauds frequently happen, particularly in cash disbursement processes, it is necessary to regularly evaluate the situation to prevent fraud, as cash implies the company’s liability.

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Control in cash disbursement influences the tests of cash balances as it includes completeness of assertions, authorization assertion, and details on the bank reconciliation. Helms (2018) draws an example of a retail store to illustrate how the control accounts affect the test of cash balances. Helms (2018) notes that companies benefit from having control in relationships with vendors. According to Helms (2018) control account eases the process of reconciliation to the vendor’s statements as it does not require the addition of all invoices to create payable accounts for each vendor.

Bradford et al. (2020) emphasized the importance of generalized audit software for helping financial and IT auditors detect material misstatements, control deficiencies, and fraud. However, the authors pointed out that financial auditors do not consider the detection of fraud through the use of technology. In the article, the authors provide recommendations on the involvement of IT in the financial auditors’ brainstorming process to increase the number of fraud variables. I would recommend making several tests for material fraud throughout the year. Helms (2018) advised making surprise cash counts of tellers’ drawers and vault cash to prevent material fraud and emphasized that the measure should be performed multiple times throughout the year by internal audits and supervisors.

References

Bradford, M., Henderson, D., Baxter, R.J. & Navarro, P. (2020). Using generalized audit software to detect material misstatements, control deficiencies and fraud: How financial and IT auditors perceive net audit benefits. Managerial Auditing Journal, 35(4), 521-547. Web.

Helms, G. (2018). Purchasing, inventory, and cash disbursements: Common frauds and internal controls. Wiley.

Ramadiyansari, R. & Sasongko, C. (Eds.). (2020). Proceedings of the International Conference on Management, Accounting, and Economy. Atlantis Press. Web.