FAR EASTERN UNIVERSITY
Institute of Accounts, Business, and Finance
Governance, Business Ethics, Risk Management
and Internal Control
Cash Management: Fraud Risk Assessment
Submitted by:
CARO, Coleen Angelique D.
COROS, Rachelle Charlene C.
DALLARTE, Craig Vincent D.
FRANCISCO, Ian Jayvee M.
MALLARI, Angel Kaile C.
NOTORIO, Charlaine Mae B.
OCAB, Milky Kate V.
TIPANERO, Angelo Harvey T.
Submitted to:
Ms. Bernadette Baul
Likelihood
Based on Annual Frequency Based on Annual Probability of Occurrence
Rating
Descriptor Definition Descriptor Definition
Expected to occur with a
5 Very often More than 35 times per year Almost certain
probability of >95% to 100%
Expected to occur with a
4 Often 15 to 35 times per year Likely
probability of 70% to 95%
Reasonably Expected to occur with a
3 Possible 5 to 14 times per year
possible probability of 35% to 70%
Expected to occur with a
2 Occasional Once to 5 times per year Not probable
probability of 14% to 35%
Expected to occur with a
1 Not likely Less than once per year Negligible
probability of <14%
Impact
Rating Descriptor Definition
· Drastic change in company’s financial statement
· Financial loss of the company could exceed to $3 million per year
5 Disastrous
·
· Significant change in company’s financial statement
· Financial loss of the company is between $50,000 to $3 million per year
4 Major
·
· Unusual change in company’s financial statement
· Financial loss of the company is between $5,000 to $50,000 per year
3 Average
2 Minor · Minor change in company’s financial statement
· Financial loss of the company is between $500 to $5000 per year
·
· Insignificant change in company’s financial statement
· Financial loss of the company is less than $500 per year
1 Casual
·
·
Fraud Risk Assessment
Preventive
[A]/
ID Identified Fraud Signific Fraud Directive[B]/
Likeliho People and/or
Numb Risks and ance Risk Controls Detective
od [1-5] Department
er Schemes [1-5] Rating [C]/
Corrective
[D]
Billing
Periodic review
Department,
R1 Lapping 3 5 15 of cash receipts C
Cashier, or
(C1)
Supervisor
Accounting
Intercept at Perform cash
R2 5 4 20 Department or C
Cashier counts (C2)
Supervisor
Utilization of
Petty Cash Custodian/
R3 5 5 25 Procurement A
Removal Cashier
Cards (C3)
Comparison of
actual Inventory
Intercept at Cash Finance
R4 4 3 12 levels and the C
Register Department amount of sale
transactions (C4)
Adequacy of
Intercept in Finance
R5 5 3 15 Documents and A
Deposit Pouch Department
Records (C5)
Segregation of
Supervisor or
Duties (C6) and
R6 Cash Larcency 3 3 9 Finance A
Access Control
Department
(C7)
Bank
Pay Envelope
Accountant/ reconciliation
R7 Removal 4 4 16 C
Bookkeeper (C8) and Cash
Count (C2)
Limiting Cash
Bookkeeper, Payments (C9)
R8 Cash Skimming 4 2 8 A
Billing Clerk and Supervision
at Lock Box (C10)
Controls:
C1 - Conducting a periodic review of cash receipts allows the company to
regularly check the cash records on a regular basis. This can also be done by
stamping all checks “for deposit only” so they can’t be cashed. This control can
decrease the likelihood of the risk to arise within an entity.
C2 – Removing cash and not recording it in accounting records could be a
form of cash fraud. By comparing the cash receipts in the cash register can be
helpful for managers to easily find the discrepancies. Also if this control will be
done, employee has less opportunity to steal and manipulate cash receipts. Cashier
would be less likely to commit fraud and the likelihood of this risk would be
mitigated.
C3- Using of Procurement cards can monitor the outflow and inflow of the
petty cash fund system. Cashier must be responsible to keep supporting invoices in
respect of payments made through petty cash.
C4 – A comparison of the company’s actual level of inventory and the
amount of sale transactions may detect any fraudulent action of an employee at the
Cash Register.
C5 - Appropriate documentation and showing evidences of receipts may
help the company to track and identify the deductions of their money and to record
transactions.
C6 - By segregating duties and matching them to the right employee can
minimize incompatible functions.
C7 - Having limited access control can ensure that only authorized personnel
have access to the firm’s assets.
C8 - By performing bank reconciliation to ensure that payment have been
processed.
C9 - By eliminating cash payments through outsourcing accounts receivable
and making payments sent straight to the outsourced bookkeeping firm will
prevent employees to practice cash skimming.
C10 - A supervision to a lock box and a habit of depositing cash to bank
daily will bring any fraudulent activity to light.
