The following are items on the inherent risk and control risk questionnaires contained in Exhibits. Categorize each item as belonging on (a) the inherent risk analysis questionnaire or the (b) control risk analysis questionnaire.
1. Does the company have significant cash flow problems in meeting its current obligations on a timely basis?
2. Are there any restrictions in getting access to cash? For example, does the company have cash in sweep accounts, or other accounts with financial institutions that may be in trouble and that may restrict access to cash?
3. Does the internal audit department conduct timely reviews of the cash management and cash handling process? If yes, review recent internal audit reports.
4. Does the company use cash budgeting techniques? How effective are the company's cash management budgeting techniques?
5. Are bank reconciliations performed on a timely basis by personnel independent of processing? Is follow-up action taken promptly on all reconciling items?
6. Does the company use the cash management services offered by its banker? What is the nature of these arrangements?
7. Has the company made significant changes in its cash processing during the past year? Have any major changes taken place in the company's computerized cash management applications during the year?
8. Have cash management service arrangements been reviewed by management and the board of directors? Are the arrangements monitored on a current basis?
9. Does the company have loan or bond covenants that influence the use of cash or the maintenance of working-capital ratios?
10. Are cash transactions, including electronic cash transfers, properly authorized? What authorization is required to make electronic cash transfers?
11. Does the company use a lockbox to collect cash receipts? What is the agreement with the financial institution? What are the company's controls associated with the lockbox agreement?
12. Is there any reason to suspect that management may desire to misstate the cash balance?
13. Do management and the board periodically review the cash management process? Does the cash management organization provide for effective segregation of duties, review, and supervision?
14. Who is authorized to make cash transfers, including electronic fund transfers, and what are the procedures by which that authorization is verified before the transfers take place? What procedures does management use to assure that the authorization process is monitored?