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Investment and Finance Cycle and EFT controls - Coggle Diagram
Investment and Finance Cycle and EFT controls
Finance Activities
Documents
Prospectus
Share Certiêcate
Minutes of
shareholders/directors
Loan/Lease contract
Debenture trust deed
Mortgage bond
Journal Voucher
Main Activites
Statutory
requirements
Authorisation for the
issue of shares
Share buy backs
Declaration of
dividends
Issue of shares
Investment
Activities
Documents and
Records
Minutes of Board of Directors (authorisation of purchases and sales).
Fixed asset register
Fixed Asset Requisition
with quoted price
General ledger
accounts
Depreciation
Proêt/Loss on disposal
Fixed assets
Accumulated
depreciation
Capital Budgets
Invoices (purchase and
sales)
Main Activites
Disposal of fixed asset
Repair and
maintenance of assets
Additions of êxed
assets
Electronic Funds
Transfer
Reconciliations
The reconciliation should be done by a person who is Independent of the person that writes up the cashbook
The reconciliation should be reviewed by senior independent official.
When making an EFT payent
• The terminal should shut down after 3 unsuccessful access attempts of logging in;
o All EFT transfers should be limited to a specific day, for example, Payroll should run 25th of each month;
o Completeness tests should be performed. E.g. If you had to pay 10 employees you have to ensure that 10 salaries were paid;
• To effect the payment 2 passwords of 2 different senior employees should be entered;
• There should be proper access controls over the terminal that is used to make the payment;
• After the payments are made there should be an:
o Audit trail
o The payment should reflect on the bank statement;
o A bank reconciliation should be performed
• Access to EFT payments should be limited to one computer;
• The reconciliation should be done by a person who is independent of the EFT transactions that were made.
• Multilevel passwords should be used, from two senior employees. These password must be simultaneously entered.
Control Objectives and Internal controls
Control Objectives- Refer to certain objectives that the organization wants to achieve with regards to every transaction.
Internal Controls- Refer to the control activities that the organization should implement to ensure they achieve the desired objectives
Accuracy: All fixed assets are recorded at the correct amount and totals are
arithmetically correct.
Fixed assets are recorded at the amount of the invoice. 2.Depreciation and other calculations are done by computer with aprogram which has been tested beforehand (if calculation is per hand, perform an independently reviewed on calculation).
Authorisation: All purchases and sales are authorised according to company’s policy
Purchases and sales of fixed assets:
• Authorised by senior managementon a numerical capital requisition/sales document;
• Authorisation/decision recorded in minutes.
Occurrence/Validity: All recorded assets are valid (really exist) and are supported by
proper documentation.
1.All fixed asset purchases are supported by a fixed asset requisition and capital budgets.
(Supporting documentation)
.2. Recorded assets are periodically compared to physical assets by an independent senior official
Recording: All transactions fixed assets and depreciation are correctly recorded
All purchases and sales of fixed assets are recorded in the fixed asset ledger accounts (control account) and fixed asset register from the source documents.
The fixed asset register is reconciled with the control accounts in the ledger on a regular basis.
Completeness: All valid fixed assets are recorded and nothing is left out.
Capital requisitions are numerically accounted for (Sequentially renumbered).
The list of missing numbers is regularly followed up.
Fixed assets are recorded in a fixed
asset register and are regularly compared with fixed assets.
Classification: All transactions fixed assets are correctly classified according to its
nature.
Fixed assets are classified into the respective categories according to company policy.
Improvements are capitalised as fixed assets and clearly distinguished from maintenance.
Cut off: All purchases and sales of fixed assets are recorded in the period to which it
relates
Fixed assets purchased are recorded at the date of receipt (per GRN) and when sold as from the date that the risks and rewards of ownership passes to the purchaser in substance.
General Controls: Assets are properly safeguarded against theft and physical elements.
Fixed assets are, as far as possible, stored in permanent form (bolted).
2.Safe guard assets by:
• Limiting access to authorised persons (locked, key control)
• Controls protecting assets against physical elements (rain, weather)
Asset adequately insured.
Weaknesses and
Risks
Weakness is the control objective that is not effected correctly. Risk is what could happen as a result of the ineffective control.
Example: not locking your car and going into the mall with your handbag not secured in the car and cellphone and valuables left of the car seat.
Weakness: Not locking the car and leaving valuables exposed on the car seat
Risk: of the handbag, cellphone and valuables getting stolen and car being hijacked.