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PETTY
CASH FUND IRREGULARITIES
Thieveries
from the petty cash fund are usually taken for
granted because they are petty.
modus operandi
detection and prevention
modus operandi
Every company has its own
petty cash fund to take care of small cash
disbursements. Cash in any amount is too tempting to
handle. Consequently ,minor dishonesties have their
beginnings in the petty cash fund. The following are
typical cases.
It was Friday, three
days before payday. An employee needed some money
for his date with his girl on that very day. All his
friends in the office were broke but not the petty
cash custodian. So, he cashed his unfunded personal
check from the petty cash fund with a promise to
redeem it on payday. He paid paid his debt but
several days after payday. The practice became
habitual until at one time he had several personal
checks as part of the large petty cash fund.
The custodian of the
petty cash fund also needed some money for the
weekend to spend some happy hours with his friends.
Anyway, he thought it would not harm the company to
temporarily borrow some cash from the fund since he
intended to repay it later. Moreover, the custodian
thought of making some more money by raising the
amounts of some petty cash vouchers after they had
been audited for a long time, the prospect of
discovery was unexpected. The petty cash fund was
usually taken for granted because the amount was
petty.
detection and prevention
When a surprise
cash audit was made, the petty irregularities
emerged. The internal auditor noted the unauthorized
temporary borrowings, the padding of some suppliers'
invoices and the corresponding petty cash vouchers
paid from the fund.
As a corrective
measure, the petty cash fund was reduced to an
amount sufficient only for the daily requirements of
the business. Cashing of personal checks was
strictly prohibited. The custodian of the petty cash
fund as well as the maker were asked to restore
immediately the amount of money taken by them from
the fund.
To discourage
alterations, the petty cash vouchers were required
to be prepared in link, indelible pencil or
typewritten and the amount written in words before
they were approved for payment for someone in
authority. Original invoices of vendors were
required to be attached to the petty cash vouchers
as supporting documents to prevent duplicate payment
on a copy of an invoice.
In replenishing
the petty cash fund, the cash disbursement section
was required to check the vouchers thoroughly for
any alternations and improprieties. To preclude the
possible re-use of paid petty cash vouchers for
second payments, the vouchers at the time of
replenishing were all cancelled by a rubber stamp
indicating the date of payment as for example, "Paid
on May 12,1980".
Frequent
unannounced inspections of the vouchers in the petty
cash drawer and the balancing of the fund by the
auditor or a responsible official were done to
discourage employees from obtaining unauthorized
cash advances. As a safeguard and to deter the petty
cash custodian from increasing the amount of an
invoice after its payment, then entering the
increased figure on the books and pocketing the cash
difference, all paid purchase invoices were checked
occasionally to ensure that the totals had not been
altered. As a precaution, the petty cash custodian
was reassigned to a job that gave him no access to
cash or receivable records. The erring employees
were strictly warned that repetition of any
dishonest act would warrant termination of service.
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