1. Mr A Black has recently acquired the controlling interest in Quicksand Limited, who are importers of sportswear. In his review of the organizational structure of the company Mr Black became aware of weaknesses in the procedures for the signing of cheques and the operations of the petty cash system. Mr Black engages you as the company's auditor and requests that you review the controls over cheque payments and petty cash. He does not wish to be a cheque signatory himself because he feels that such a procedure is an inefficient use of his time. In addition to Mr Black, who is the managing director, the company employs 20 personnel including four other directors, and approximately three hundred cheques are drawn each month. Further the petty cash account normally has a working balance of about 300, and 600 is expended from the fund each month. Mr Black has again indicated that he is unwilling to participate in any internal control procedures which would ensure the efficient operation of the petty cash fund.

You are required to

(a) Prepare a letter to Mr Black containing your recommendations for good internal control procedures for:

i. Cheque payments (6 Marks)

ii. Petty cash (6 Marks)