Internal Control Over Cash Disbursement Case Study

Internal control over cash Disbursement: Cash is disbursed for a variety of reasons, such as to pay expenses and liabilities or to purchase assets. Generally, internal control over cash disbursement is more effective when payments are made by cheques rather than by cash, except for incidental amounts that are paid out of petty cash. Payments are made by cheques generally only after specified procedures have been followed. In addition, the paid cheques provide proof of payment. (Kloot and Sandercok 1991)
2.7 Classification of internal control
Internal control can be classified as administrative control and accounting controls
2.7.1 Administrative controls: This comprises the plan of organization all methods and procedures that facilitate management

This should not be confused with management intervention, which represents management actions to depart from prescribed policies and procedures for legitimate purposes. this occurs when a senior manager bypass protocol. There is a high risk involved when senior management are able to override laid down policies or procedures for legitimate course of action.
• Collusion: Control systems can be circumvented by employee collusion. Individuals acting collectively can alter financial data or other management information in a manner that cannot be identified by control systems. A sufficiently complex set of controls can make it difficult to assemble the needed number of conspirators, but at a potentially great cost in organizational inefficiency. Conspiracies of this sort usually come to light when they are observed (and reported) by someone who is not a party to the conspiracy, or when there is a falling out among the conspirators. They may also be detected during a routine audit if substantial amounts of funds are involved or if the conspirators are not sufficiently careful in falsifying the