Question: In Case, if the petty cash custodian were replaced and the frequency of fund reimbursement decreased from every two days to every four days, what might you suspect?
Case: The petty cash custodian (1) brought postage receipts from home and paid them from the fund, (2) persuaded the supervisor to sign blank authorization slips the custodian could use when the supervisor was away and used them to pay for fictitious meals and minor supplies, and (3) took cash to get through the weekend, replacing it the next week. Postage receipts were from a distant post office station the company did not use. The blank authorization slips were dated on days the supervisor was absent. The fund was cash short during the weekend and for a few days the following week. The fund was small ($500), but the custodian replenished it about every two working days, stealing about $50 each time. With about 260 working days per year and 130 reimbursements, the custodian was stealing about $6,500 per year. The custodian was looking forward to getting promoted to general cashier and bigger and better things!
AUDIT APPROACH: The audit team should discuss petty cash procedures with the custodian and supervisor, especially those that relate to situations in which the custodian or supervisor is not available to provide needed petty cash. Next a sample of petty cash reimbursement check copies with receipts and authorization slips attached should be studied for evidence of authorization and validity. On Friday, an audit team member should count the petty cash and receipts to see that they total $500. Then the fund should be recounted later in the afternoon. (The second count should be a surprise.) The custodian or supervisor should be present at all times so that the auditor will not be accused of theft.