Issue Number 29
December 2016

Cash receipts – can they create a risk to an organisation?

In the current electronic age the vast majority of transactions are electronic either by way of customers settling via direct debit or payment of suppliers by electronic funds transfer.  As a result organisations have assessed electronic/digital transacting as a financial and/or organisation risk and have documented such risk within their risk matrix.

However, there are a number of circumstances where organisations receive cash from customers or use cheques to settle debts with suppliers and/or employees.  Such transactions are not usually significant to an organisation.  As a result organisations do not ordinarily place significant emphasis on the risks around such transactions as any loss incurred will not usually be significant. 

Organisational risk assessment outlines the controls around cash receipting, such as checking to ensure that all cash receipts are recognised by the organisation. Given that associated losses are not usually significant; the appropriate risk assessment is low. This can create the opportunity for fraudulent cash transacting activities to occur.

While any cash loss may not be significant in monetary terms, the loss may highlight other issues within an organisation including:

  1. Poor cultural practices within the organisation
  2. Bad publicity within the community that the organsaition operates if such a loss arises
  3. Lack of focus on internal controls within an organisation.

While dealing with cash transactions should not be given a significant risk rating, organisations should still be aware that the risk of fraudulent activity around cash handling does exist.  Accordingly appropriate focus on cash handling should still be considered and assessed (within the risk parameters of the organisation) to minimize the risk of monetary loss and/or bad publicity.

Martin Fensome
Partner - Audit

Important: This is not advice. Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly.

We therefore recommend that our formal advice be sought before acting in any of the areas. This document is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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