Internal Control Questionnaires and Verification Procedures

Cash

  1. Immediately upon arrival at the bank, determine the location of all cash, cash items, securities, and non-ledger items to be controlled.

  2. Establish control over all necessary items and, using appropriate sampling techniques, select funds to be counted and assign personnel to the various funds. There should be no movement of cash or securities into or out of the vault area unless an examiner controls such movement. The examiner-in-charge is to be contacted immediately if there are any movements which are not controlled. Also, all compartments in the vault should be sealed (including lockers reported to contain other than cash) until all items are counted and control is no longer necessary. (Note: Sealing of vaults containing other than cash is to be performed by examiners responsible for those areas.)

  3. Inquire if the bank has incoming or outgoing cash shipments and consider confirming such amounts. If bagged items are on hand, note contents without counting and control bags to armored car pick-up, etc., and confirm balances with the recipient on a test basis. This step applies to “Payroll Cash,” “Change Fund Cash,” “Mutilated Money - Fed Shipments,” etc. Also, examine, on a test basis, subsequent payments for bagged cash.

  4. Obtain a copy of the teller’s proof sheets as of the close of business the day of the examination and retain them for the working papers.

  5. Count and agree cash (both U.S. currency and foreign currency) to the proof sheets. Count foreign currency in separate totals for each currency. If after-hours transactions have been conducted, the debit and credit totals must be included in the reconcilement between actual cash counted and the closing cash figure reflected on the teller’s proof sheets. The custodian of the cash and the examiner must both remain with the cash until the verification procedure is completed.

  6. Transcribe cash count information to a blank cash sheet, and retain for the working papers. Upon completion of the count, obtain the teller’s initial on the working paper, and release control over the fund. If the examiner discovers a material difference, the teller in the presence of the examiner should immediately recount the cash. If the difference is not resolved, an officer should be called in to count the cash, and both the officer and the teller should be required to sign the cash sheet reflecting the actual amount of cash counted.

  7. Review all after-hours items to ensure their validity, and trace the items to their final disposition.

  8. Detail all items on the cash sheet, other than cash, found in the cash compartments although they may not be required in the reconciliation process.

  9. Prepare a listing of proof sheets, and agree or reconcile the total to the bank’s daily statement and to the general ledger as of the examination date. (Note: The bank’s daily cash form may be appropriate for this purpose.)

  10. Review the teller’s proof sheets for the day of the cash count, and ascertain that all fund balances are reasonable in relation to operating requirements. Note any fund balances in excess of reasonable amounts in the working papers for subsequent discussion with an appropriate bank official.

  11. For each foreign currency held, verify approximate U.S. dollar carrying values by obtaining current bid bank note rates for the foreign currencies on hand. Using those rates, convert each foreign currency into U.S. dollar equivalents. The resulting U.S. dollar values should be verified with the amount shown on the bank’s general ledger for reasonableness. The rates at which the bank buys and sells foreign currency will not exactly match the rates used by the examiner because of the different day’s rates, shipping charges, insurance, and other costs.

  12. Check the accuracy of foreign currency revaluations and that resulting profit or losses are properly posted to appropriate income accounts. (Foreign cash may be revalued along with other foreign currency ledger and future exchange contracts by the bank’s accounting/auditing department.)

Previous: Verification Procedures Next: Cash Items