INTERNAL CONTROL OVER CASH OF WEGAGEN BANK

(A Case Study on cmc Branch)

A RESEARCH PAPER FOR THE PARTIAL FULFILMENT OF THE

BACHLOR DEGREE OF ART IN ACCOUNTING

PREPARED BY:

KEZINA SHAFI

ADVISOR:

DERESSE MERSHA (ATO)

ACCOUNTING DEPARTMENT

BUSINESS AND ECONOMICS COLLEGE

JIMMA UNIVERSITY

MAY, 2012

JIMMA, ETHIOPIA

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 ACKNOWLEDGEMENT

First and for most I would like to thanks to Allah for helping me to accomplishing this work.

Next, I wish to acknowledge my advisor instructor Deresse Mersha for his critical advice. And
also thanks to my parents for their un reserved financial and moral support. I also grateful to all
of my friends who contribute their comments and moral support.

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 ABSTRACT
The study focused on internal control over cash analysis in Wegagen bank .The general objective
of doing this research is to asses’ internal control over cash. To conduct the study both primary
and secondary source of data is used to get full information. The data analyzed through
descriptive method by using table and percentage forms. Finally some sort of conclusions and
recommendation is forwarded based up on the identified problems. The conclusion and
recommendation that give by the researcher uses for various institutions for strength their
internal control over cash.

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 Table of Content

Contents Page
ACKNOWLEDGEMENT .................................................................................................................................... I
ABSTRACT...................................................................................................................................................... II
Table of Content .......................................................................................................................................... III
List of Tables ............................................................................................................................................. V
CHAPTER ONE
INTRODUCTION ............................................................................................................................................. 1
1.1. Background of the Study .................................................................................................................... 1
1.2. Background of the Organization ........................................................................................................ 1
1.3. Statement of the Problem ................................................................................................................. 3
1.4. Objective of the Study ....................................................................................................................... 3
1.4.1. General Objective ....................................................................................................................... 3
1.5. Significance of the Study .................................................................................................................... 4
1.6. Scope of the Study ............................................................................................................................. 4
1.7. Limitation of the Study....................................................................................................................... 4
1.8. Organization of the Paper .................................................................................................................. 4
1.9. Method of the Study .......................................................................................................................... 4
1.9.1. Data Source ..................................................................................................................................... 5
1.9.2. Method of Data Collection.............................................................................................................. 5
1.9.3. Method of Data Analysis ................................................................................................................. 5
1.9.4. Method of presenting the out comes ............................................................................................. 5
CHAPTER TWO
2. LITERATURE REVIEW ................................................................................................................................. 6
2.1. Internal Control .................................................................................................................................. 6
2.2. Objectives of internal control over cash? .......................................................................................... 6
2.3. Internal control over cash receipts .................................................................................................... 7
2.3.1. Cash Sales .................................................................................................................................... 7
2.3.2. Electronic Points of Sale .............................................................................................................. 8
2.3.3. Collection from credit Customers ............................................................................................... 8
2.4. Cash Disbursements ........................................................................................................................... 8

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 2.4.1. Control of a voucher system ....................................................................................................... 9
2.4.2. Electronic Funds Transfer System ............................................................................................... 9
2.5. Internal control of petty cash funds .................................................................................................. 9
2.6. Internal Control Over Cash on Deposit ............................................................................................ 10
CHAPTER THREE
3. DATA ANALYSIS AND INTERPRETATION .................................................................................................. 11
Introduction ............................................................................................................................................ 11
3.1. Demographic Characteristics of Respondents ................................................................................. 11
3.2. Internal Control System ................................................................................................................... 13
3.3. Internal control over cash receipt.................................................................................................... 15
3.4. Control over Cash Payment ............................................................................................................. 16
3.5: Control over cash on hand .............................................................................................................. 17
CHAPTER FOUR
4. CONCLUSION AND RECOMMENDATION ................................................................................................ 19
4.1. Conclusions ...................................................................................................................................... 19
4.2. Recommendation............................................................................................................................. 20
Appendix ................................................................................................................................................. 21
Reference ................................................................................................................................................ 24

IV
 List of Tables
Lists Page
Table 3.1. Sex of the respondent…………………………………………………. 11
Table 3.2: Age of the respondents………………………………………………. 11
Table 3.3 income level of the Respondents ……………………………………. 12
Table 3.4: Respondents position in the bank……………………………………. 12
Table 3.5: responses on educational background….. …………………………… 13
Table: 3.6: Responses on service year of respondents…………………………… 13
Table 3.7: Responses on proper system over internal control over cash………….. 14
Table 3.8: Responses on training organized procedure …………………………. 14
Table 3.9: Responses on difficulties in collecting cash …………………………. 15
Table 3.10: Do you make daily reconciliation of cash collected………………… 16
Table 3.11: responses on daily reconciliation of cash payment…………………. 17
Table: 3.12: Responses on security over cash on hand…………………………. 18

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 CHAPTER ONE
INTRODUCTION

1.1. Background of the Study

In accounting, the term cash means checks, money orders and funds on deposit in a bank,
currency and coins. A very large number of cash transactions in modern businesses involve
checks. The paper handling and recording of cash receipts and cash payments are a vital concern
in all types of business, services business, merchandizing business and manufacturing business.
Cash is an essential asset for every firm, but it is also the asset that is most easily stolen lost or
mishandled. Thus a well managed business has careful procedures to control cash and to record
cash transactions.

Every business should have a system of internal control over cash that is specifically worked to
its needs. The accountant plays a vital role in designing such a system and works with
management to establish and monitor the system. In developing internal control over cash
procedures for cash receipts and cash payments of a business, accountants follow certain basic
principles. This study will be conducted to assess the cash control system of Wegagen Bank cmc
Branch.

1.2. Background of the Organization

Wegagen Bank is a share Company; it is established in June 11, 1997. It is registered as a public
share holding company in accordance with licensing and supervision of banking business
proclamation No. 84/1994 and the commercial code of Ethiopia. It started with 60 million paid
up capital and 30 – million subscribed capital. When it is established, the number of share
holders was 16. After nine years of operation, Wegagen raised the paid up capital to 111 million
and number of share to 116,091.

Wegagen’s mission is to attract potential customers, create and sustain market leadership by
establishing net working of high performing work units, and also to generate high amount of
profit.

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Wegagen is committed for achieving its objectives by following core business principles the
bank stated at establishment, with loyal and committed staff members. These principles are
outstanding customer service, business integrity, prudent lending policy, and strict control
discipline.

Up to the year 2009/10 the bank has 55 branches of which 27 are located in Addis Ababa and 28
are in different regional towns of the country. The study area of the research is in cmc branch. It
has already implemented the first of its kind in Ethiopia. Integrated computer wide area net work
as of July 2000. It has networked the head office, city branches and outlining branches.
The Major Services of Wegagen are:-
 Accept different types of deposits
 Grant variety of loans
 Offer full – fledged international banking service.
 Renders local and international money transfer services.

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1.3. Statement of the Problem
The study tries to investigate the internal control over cash of Wegagen bank cmc
Branch. The organization has many goals, in order to achieve the objectives of the bank
, it has to control resources particularly its cash. Because cash is the most liquid asset easily
mishandled or susceptible to theft. Those cash related activities will be difficult to the
organization to be profitable in order to solve the problem that arises due to effective control
system over cashes. To evaluate an internal control over cash system performance the following
related questions are raised.

1. Is Wegage bank control its cash efficiently?

2. Is Wegagen bank build strong internal control system over cash?
3. Is Wegagen bank free from frauds and error that comes from weak internal control over
cash system?
4. Is the staff of the bank give more attention or focus on internal control over cash system?

1.4. Objective of the Study

1.4.1. General Objective
The general objective is to assess internal control over cash in case of Wegagen bank in cmc
branch.
The specific objectives of the study are:
1. To study the cash control system designed and implemented in the bank.
2. To evaluate the internal cash control over cash receipt.
3. To assess the internal cash control over cash payment.
4. To give some recommendation on the cash receipt and cash payment procedures of the
company.

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1.5. Significance of the Study
Under this study the researcher identify its weakness and their strength for further improvements
on internal control system over cash by selecting Wegagen Bank with the expectation of
resulting in general view of internal policies and procedures and their practical world application.
The reader can identify the weakness and strength of the internal control cash performance of
Wegagen bank of cmc branch.

1.6. Scope of the Study

Since internal control has many factors like internal control over plant asset, inventory, non cash
payment, and non cash receipts etc .The research will be focused only on the internal control
over cash that cash receipts and cash payments for the Wegagen bank cmc branch.

1.7. Limitation of the Study

The following limitation are faced
 Shortage of time
 Financial problems and somewhat reference materials.
 Some staff members are not willing to give information.
 The class schedule is not suitable.

1.8. Organization of the Paper

The paper contains four separate chapters. The first chapter is the introductory part which
includes background of the study, background of the organization, statement of the problem,
objective of the study, significance of the study, scope of the study, limitation of the study,
organization of the paper and meted of the study parts. The second chapter is literature review
which is the general explanation about the topic. Chapter three is about discussions and analysis
and chapter four is about recommendations and conclusion.

1.9. Method of the Study

For the overall success and effectiveness of the study objective, descriptive research design is
applied in this research. Because descriptive research is aimed at answering what, when, who
and how type of question about the research.

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1.9.1. Data Source
A. Primary Source
The primary source is collected using the questionnaire from internal audit committee,
managements, and other financial staff members.
B. Secondary Source of Data
The secondary source that the researcher use are reference books, related written materials that
support to the research and organizations manual.

1.9.2. Method of Data Collection

The researcher uses both sources of data primary and secondary source of data. The primary is
questionnaire to get possible response from different groups. Secondary sources of data are also
reference books, related written materials that support to the research and organizations manual.

1.9.3. Method of Data Analysis

The researcher uses percentage to analyze the responses of the respondents and it presents in the
form of tables to provide comprehensive listing and discussions of the internal control over cash
in the Wegagen bank of cmc branch.

1.9.4. Method of presenting the out comes

Based on the formatted coherent and systematized written report that forwards necessary
recommendation and conclusion. Finally presenting outcome would follow by the researcher
orally or by project to the concurred parties.

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 CHAPTER TWO
2. LITERATURE REVIEW
As cash is the most liquid of all assets it is always attracted auditors attention for many good
reason. The ease with which money can be transactions directly or indirectly affect cash and the
diverse nature of the process involved that is billings, collections, deposited and disbursement
implementing internal control in the area of cash management very difficult. It is the most likely
to be diverted and improperly used or purloined by employees. (O. ray Whittington and, kurt pay
2001)

Cash consists of coins, currency (Paper money) checks, money on hand or on deposit in a bank
or similar depository. The general rule is that if the bank will accept it for deposit is cash. Just as
cash is the beginning of a company’s operating cycle, it is usually the starting point for
company’s system of internal control. Cash is the one asset that is readily convertible in to any
other type of asset (Weygant, Kaiso and Kimmel; 1999).

2.1. Internal Control

Internal Control consists of the plan of organization and all the related methods and measures
adopted with in a business to safeguard its assets from employee theft, robbery and unauthorized
use. Enhance the accuracy and reliability of its accounting records by reducing the risk of errors
(unintentional mistakes) and irregularities (intentional mistakes and misrepresentations) in the
accounting process. (Weygent, Kaiso and Kimmel; 1999, p. 280)

Internal control is comprehensive in that it addresses the achievement of objectives in the area of
financial reporting, operating, and compliance with laws and regulations. Many people
interpreted the term internal control as the steps taken by a business to prevent fraud both
misappropriation of assets and fraudulent financial reporting (O.Ray whittingron andkurt pany;
2001, p. 241).

2.2. Objectives of internal control over cash?

The objectives of internal control over cash is to make sure whether the organization is
safeguarding and reporting cash in the appropriate manner. As cash has highest risk and is
difficult to control it needs extensive and tight and effective internal control procedures.

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According to meigs and others the method or rule for the achieving internal control over cash
objectives understands in detail operation routine of a particular business for efficient control
procedures.

Objectives of examining cash transactions, cash funds and cash balances in banks is to establish
the validity and propriety of the cash transactions and to properly state the cash and hand for
purposes of financial statement presentation. Cash is no more valuable than any other asset of
equal current market price. The examination of cash and cash transaction is important because
cash is a favorite item for theft: the majority of all business transactions involves a cash count or
terminates in it. Error in any account can result in errors in cash accounts, and errors in cash
accounts indicate probable errors in other account principally account payable debit sand account
receivable credits (Arthur W. Homes: 1966).

2.3. Internal control over cash receipts

Cash receipts are the main part of the revenue generating cycle and with a high possibility of
misappropriation. The accuracy of the recorded receipt as well as the omissions of some receipts
before recording must be the area where the auditor has to concentrate and give a high priority.
(Arthur W. Homes: 1966)

Cash receipts may result from a variety of source: cash sales, collections on account from
customers; the receipt of interest, rents and dividends, investments by owners bank loans; and
proceeds from the sales of noncurrent assets. (John W. Cook year : 1980)

2.3.1. Cash Sales

Control over cash sales is strongest when two or more employees (usually) sales clerk and a
cashiers participate in cash transaction with a customer Restaurants and cafeterias often use a
centrally located cashier. In many retail establishments, the nature of the business is such that
one employee must make over the counter sales, deliver the merchandise, receive cash, and
record the transaction in this situation dishonesty may be discouraged by proper use of cash
registers electronic point of sales system. (O. Ray Whittington and Kurt pany; 2001 P. 386)

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2.3.2. Electronic Points of Sale
Many retail stores use various types of electronic cash registers, including online computer
terminals. The sales person need only scan the code for the register to record the sales at the
products price which is stored in computer. Thus, the risk of a sales person recording sales
person recording sales at erroneous price is substantially reduced. Besides providing strong
control over cash sales, electronic registers often may be programmed to perform numerous of
the control function (O. Ray Whittington and kurt pany 2001,p.386).

2.3.3. Collection from credit Customers

In many manufacturing and whole sales companies, cash receipts include many checks received
through the mail. This situation poses little threat of defalcation unless one employee is
permitted to receive and deposit these checks and also to record the credits to the customer’s
accounts. (O. Ray Whittington and kurt pany 2001, p. 286)

The control system must allow the incoming mail to be opened in the mail to be opened in the
mail room where the employee prepares a control listing of the incoming cash receipts which
shows the amount received and identify the customers by name and account number. One copy
of the control listing will be forwarded to the controller another copy to the cashier and the
remittance advices and control list will be given to the employee who is responsible for the
customers accounts. (O. Ray Whittington, and Kurt Pany 2001, p. 289)

2.4. Cash Disbursements

Cash may be disbursed for a variety of reasons such as to pay expenses and liabilities, or to
purchase assets. Generally, internal control over cash disbursements in more effective when
payments are made by check, rather than by cash, excepts for incidental amounts that are paid
out of petty cash. Payment by check generally occurs only after specified control procedures
have been followed in addition, the “paid’ check provides proof of payment. (Weygant, Kaiso
and Kimmel 1999 ,p. 290)

Cash disbursements are the out flow of money from the organization for the services or goods
received in verifying the cash disbursement records, all items are not selected. Some individual
items will be selected for sampling and using the sampling techniques the records will be tested.

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The items will include check register, vender’s invoices, contracts and agreements. (Kaiso,
Weggant and Kimmel 1999, p. 290)

2.4.1. Control of a voucher system

Most medium and large companies use a voucher system as a part of their internal control over
cash disbursements. A voucher system is an extensive network of approvals by authorized
individuals acting independently to ensure that all disbursements by check are proper.

The system begins with the authorization to incur the cost or expense and ends with the issuance
of a check for the liability incurred. A voucher is an authorization form prepared for each
expenditure in a voucher system. Vouchers are required for all types of cash disbursements
except those petty cash. The voucher is prepare din the account payable department. (Kaiso,
Waygent, Kimmel; 1999,p.290)

2.4.2. Electronic Funds Transfer System

Electronic funds transfer is a disbursement system that uses wire, telephone, telegraph, or
computer to transfer cash from one location to another. Use of electronic funds transfer is quit
common. For example the authors receive no formal payroll checks from their universities.
Which simply send magnetic tapes to the appropriate banks for deposit. Regular payments such
as these for house, car or utilities are frequently made by electronic funds transfer. (Kaiso,
Weggant and Kimmel: 1999 p. 290)

Financial institutions have developed electronic fund transfer system that process funds related
from sections for customers as an alternative to paying by checks increasingly, electronic data
interchange systems, which always the interchange of data from one company’s computer to
another’s are electronically transferring funds between companies bank account. (Kaiso,
Waygent and kimmel; 1999, p. 292)

2.5. Internal control of petty cash funds

Internal control over payments from an imprest petty cash fund is achieved at the time the fund is
replenished to its fixed balance rather than at the time small amounts of cash are handed out.
When the custodian of a petty cash fund requests replenishment of the fund, the documents
supporting each disbursement should be reviewed for completeness and authenticity, and defaced

9
or perorated to prevent rouse. Audit tests of petty cash emphasize transactions rather than the
year – end balance. (O. Ray Whittington and Kurt Pany 2001 ,p. 392)

The auditors may test one or more replenishment transactions by examining petty cash vouchers
and verifying their numerical sequence. Petty cash funds are sometimes kept in the form of
separate bank accounts. The bank should be instructed in writing not to accept for deposit is such
an account any checks payable to the company. The deposit will be limited to checks to
replenish the fund and drown payable to the company. The deposits will be limited ot checks to
replenish the fund and drawn payable to the bank or to the custodian of the fund. The prohibition
against deposit of checks payable to the company is designed to prevent the routing of cash
receipts into petty cash since this would violate the basic assumption of limited disbursements
and review at time of replenishing the fund. (O. Ray Whittington and Kurt Pany; 2001, p. 392)

2.6. Internal Control Over Cash on Deposit

The verification of cash on deposit starts at the verification day of cash on hand. For verifying
cash on deposit cut off data is needed which records all cash receipts and disbursements
preceding the verification date. The bank reconciliation will be greed with the totals of the cash
receipts total in the working paper, which have the dated, number and amount of the last
checques written.

The controller must verify all the reconciling items that is the balance in the general ledger and
on the bank statement. The most common reconciling items are: deposit in transit, outstanding
cheques and other reconciling items. (John W. Cook 1980)

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 CHAPTER THREE
3. DATA ANALYSIS AND INTERPRETATION

Introduction
In this chapter, the researcher try to evaluate the internal control over cash system of Wegagen
Bank cmc branch, the branch has 25 permanent employees. The researcher distributed 20
questionnaires from those questionnaires 18 are collected. This paper assesses and evaluates
internal control over cash system of Wegagen Bank cmc branch based on the response from the
18 employee.

3.1. Demographic Characteristics of Respondents

Table 3.1. Sex of the respondent
Sex Number of respondents Percentage
Male 14 77.8%
Female 4 22.2%
Total 18 100%

As shown in table 3.1 above from, respondent of 18, 14 are males and 4 are a female which
means the males take the majority number
Table 3.2: Age of the respondents
Age of the respondents Number of respondents Percentage
20 – 25 5 27.78%
26 – 35 10 55.5%
Above 35 3 16.67%
Total 18 100%
Source: Questionnaire
As indicated in table 3.2 about 55.5% of respondents are between 26 – 35 age, 27.78% of the
respondents are between 20 – 25 and 67% of the respondents are above 35.

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Table 3.3 income level of the Respondents
Income level Number of respondents Percentage
Birr 650 – 1000 0 0
Birr 1001 – 1500 0 0
Birr 1501 – 3000 5 27.8%
Above birr 3000 13 72.2%
Total 18 100%
Source: questionnaire
As it is indicated in table 3.3 about 72.2% of the respondents income level is above birr 3,000
and about 27.8 have income level between birr 1501 – 3000. This indicates most of the
respondents income level is above birr 3000.

Table 3.4: Respondents position in the bank

Position in the bank No of respondents Percentage
Teller 5 27.8%
Accountant 5 28.8%
Account clerk I 2 11.1%
Cashier 2 11.1%
Auditor 1 5.6%
Loan office 1 5.6%
Journal keeper 1 5.6%
International banking officer 1 5.6%
Total 18 100%
Source: questionnaire
As we can see the above tabel3.4 most of the respondents are accountant and tellers.

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Table 3.5: responses on educational background
Educational background No of respondents Percentage
Diploma /TVET/ 5 27.7%
First Degree 10 55.5%
Above First Degree 3 16.67%
Total 18 100%
Source: Questionnaire
As it is indicated in table 3.5, the respondents educational level is more of first degree. This
insures that most of the employees are well educated and they are much aware of internal control
over cash.
Table: 3.6: Responses on service year of respondents
Service year No of respondents Percentage
1 – 3 years 5 27.78%
4 – 6 years 7 38.89%
7 – 10 years 4 22.2%
Above 10 years 2 11.1%
Total 18 100%
Source: Questionnaire
As it is indicated in table 3.6, the service respondents are categorized in to four categories. That
is from 1 – 3 years, 4 – 6 years, 7 – 10 years and above 10 years. Most of the respondents
(38.89%) have 4 – 6 years service in the organization and this implies that they are well familiar
with jobs they have been assigned based on the questionnaire responses. Hence the researcher
hopes that there will be a faire response from the respondents.

3.2. Internal Control System

As a principle, top management of the organization must authorize the line of authority the
organization and determine the responsibilities of each employee.

According to the response of financial manager and accounting clerks of Wegagen bank the chief
accountant assigned not a specific job. Generally accounting section specific job is assigned for
specific duties to each employee can assure establishment of responsibilities. The advantage of

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this is it does not create carelessness. And also it makes feel eager responsibilities for those
specific accounting activities. But it has some disadvantages for example; it does not create
opportunity for promotion due to the fact that an employee is not assigned accounting activities.

According to respondents evaluation the company have cash control manual /regulation/
procedure and fair manual regulation in the branch.

Table 3.7: Responses on proper system over internal control over cash
Do you think there is a proper No of respondents Percentage
system over internal control over
cash?
Yes 18 100%
No 0 0
Total 18 100%
Source: Questionnaire
As indicated in table 3.7, all respondents evaluates that there is a proper system over internal
control over cash, in the organization.

Table 3.8: Responses on training organized procedure

Is there any training organized over No of respondents Percentage
internal control over cash procedure of the
bank?
Yes 14 77.8%
No 4 22.2%
Total 18 100%
Source: questionnaire
Respondents evaluate training organized over internal control over cash procedure evaluate as
follows 77.8% of the respondents evaluate it yes and 22.2% no, the evaluation shows that
strengthens of the internal control system of the organization.

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3.3. Internal control over cash receipt
Cash receipts are the main part of the revenue generating cycle and with a high possibility of
misappropriation. The accuracy of the recorded receipt as well as the omissions of some
receipts before recording must be the area where the auditor has to concentrate and give a high
priority.

As the respondents evaluation, the organizations source of cash collection in bank are customers
deposit, local transfer, service charge and others. And the method of cash collect the cash
receipts are in cash.

Table 3.9: Responses on difficulties in collecting cash

Does the organization get some difficulties in No of respondent Percentage
collecting in cash
Yes 12 66.7%
No 6 33.3%
Total 18 100%
Source: Questionnaire
As it is indicated din table 3.9, there is some difficulties in collecting in cash. According to
employees respondent 66.7% of employee assure that the collecting cash is difficult in the
organization.

As the respondents explained the cash collection difficulties are with the reason of counting
machine errors and no quick maintenance in time of failer
.
Wegagen bank cmc branch counts their cash collection two times and they uses pre – printed
and pre numbered documents which help the controlling system and avoid errors. Pre – printed
documents require less additional information, reduce the amount repeating work and provide
aid in hour to complete documents. All the necessary documents of receipts and invoice are
called from external and internal part of the organization to the general accounts section and the
accounts are recorded on the register.

15
Wegage Bank cmc branch uses cash counting machine to reduce errors, and it uses varies
mechanical devices including computer, for control system. Like cash register, adding machines,
signature machine and safes. These help the organization to control the accounting time keeping
and accuracy activiti

Table 3.10: Do you make daily reconciliation of cash collected

Do you make daily reconciliation of cash No of respondents Percentage
collected?
Yes 18 100%
No 0 0
Total 18 100%
Source: questionnaire
Definitely, all respondents respond that the organization make daily reconciliation of cash
collected with supporting document. This implies the bank have strong daily reconciliation of
cash collection.

3.4. Control over Cash Payment

In this section, the researcher tries to discuss and explain the accounting procedures for
controlling cash payments in the bank. The organization makes cash payment the causes of
customer’s withdrawal and transfer. This payment is made by customer requirement and the
bank procedure. And the count of cash payment is made two times before they give to the payee.

The bank Paid cash payment when actual cash is in the form of cash, in the form of cheque and
transfer from a bank account and evidence by a bank evidences. The source documents to
records cash paid in any of the above firm is payment voucher. The payment voucher is used to
acknowledge and evidence the payment of cash. The accountant maintains the payment voucher
for cash paid by cheque or direct transfer from a bank account. Wegagen bank Addis Ababa
branch use bank account for control purpose over cash payment monthly.

16
Table 3.11: responses on daily reconciliation of cash payment.
Do you make daily reconciliation of cash No of respondent Percentage
payment with supporting document
Yes 18 100%
No 0 0
Total 18 100%
Source: Questionnaire
Definitely, all respondents respond that the organization make daily reconciliation of cash
payment with supporting document. This implies the organization has have strong daily
reconciliation system.

3.5: Control over cash on hand

Cash on hand mostly consist of receipts from customers for delivering different goods and
service, petty cash account, payment for different payables. It needs strong internal control
because as it is easily available and liquid it is a very risky asset
Table: 3.12: Responses on security over cash on hand
Do you think there is proper No of respondent Percentage
security over cash on hand
Yes 18 100%
No 0 0
Total 18 100%
Source: Questionnaire

Definitely, all respondents’ responds that the organization has proper security over cash on hand
(100%). This implies the organization have strong proper security over cash on hand.

Petty cash is used in Wegagen Bank cmc branch as a means of operating much activety.
Wegagen cmc branch is frequently need cash to pay small amounts, such as postage expense,
immediate transaction cost, for small purchase of urgently needed supplies of material and for
related purposes the bank use petty cash. The organization procedure that made for the control
17
over petty cash is by counting physically. The excess cash is put in control treasury head office.
In Wegagen Bank cmc branch customer service manager is responsible for replenishment of
petty cash. All checks are pre numbered by printers. All persons who sign checks are prohibited
to have access to petty cash.

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 CHAPTER FOUR
4. CONCLUSION AND RECOMMENDATION
Wegagen Bank in general is expected to provide banking service to its customer all over the
country. To give constant and reliable banking services to be customers strong financial position
is nesecessery. Internal control is one of the mechanisms to control the asset of the bank to have
strong financial position.

4.1. Conclusions
To achieve the missions, objectives values and strategies Wegagen bank Addis Ababa branch
control of cash and effective management of cash should exist. Based on the analysis those
activities particularly the internal control system are effectively and efficiently performed. It is
difficult to conclude that the control effort is absolutely as per the requirements to be fulfilled.
After this ,the researcher arrived at the following findings.
 The study shows that, the bank have training organized over internal control over cash
procedure of the bank. This procedure is means to have strong internal control over
cash.
 The study shows that, the Wegagen bank gets some difficulties in collecting cash with
the reason of counting machine errors and no quick maintenance in time of failer.
 The bank prepares daily reconciliation of cash payment. This daily reconciliation is
verified by the accounting department.
 The bank uses different sources documents for cash collection, for cash payments and
for internal transfer of cash from one section to other.
 In Wegagen bank, there is proper security over cash on hand. This implies the
organization have strong proper security over cash on hand.
 More of the employee of the bank is first degree and more experienced i.e the bank has
few above first degree.

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4.2. Recommendation
Based on the findings of the study the researcher would like to recommend the following.
 The study shows that, the bank have training organized over internal control over cash
procedure of the bank. This procedure is meant to have strong internal control over
cash. Therefore, the bank is advisable to continue such training organized over internal
control over cash.
 The study shows that, the Wegagen bank gots some difficulties in collecting cash with
the reason of counting machine errors and quick maintenance in time of failed. So the
researcher recommended that be careful in the counting machines errors and counting
machine have to be checked and maintained quickly.
 The bank prepares daily reconciliation of cash payment. This daily reconciliation is
verified by the accounting department. Thus, the researcher recommended continuing
preparation of daily reconciliation bases for the soc of effective internal control
purpose.
 The bank uses different sources documents for cash collection, for cash payments and
for internal transfer of cash from one section to other. The researcher strongly
recommended that, the presence of effective source of document plays a great role for
the banks efficient internal control.
 In Wegagen bank, there is proper security over cash on hand. This implies the
organization have strong proper security over cash on hand. The researcher
recommended continuing proper security over cash on hand.
 The researcher also recommends that, he Wegagen bank Addis Ababa bank have
degree holde rand above as well as experienced personnel this is advisable in order to
perform its activities as the management needs and finally to result good performance
eon its accounting system.

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 Appendix
JIMMA UNIVERSITY
BUSINESS AND ECONOMICS COLLEGE
ACCOUNTING DEPARTMENT
Dear Respondents!
The objective of this questionnaire is to collect relevant data on internal cash control in your
organization. Your response will be used only for conducting research for the completion of BA
Degree in accounting your response will be kept confidentially and will not be used for any other
purpose. Therefore, you are kindly requested to respond by putting “” mark on the box and
give additional explanation of required. I would like to thank you in advance for your
cooperation in filling this questionnaire.
I. General Questions
1. Gender Male Female
2. Age of the respondent 10 – 25 26 – 35 above 35
3. Income Level
Birr 650 – 1000
Birr 1001 – 1500
Birr 1501 – 3000
Above Birr 3000
4. Your position in the bank _______________________________________________________
________________________________________________________________________
5. Educational Status
Diploma/TVET
First degree
Above first degree
6. Employeement
Permanent Temporary
7. Experience
1 – 3 years 7 – 10 years
4 – 6 years above 10 years

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II. Control over cash general
8. Is there a cash control manual /Regulation/ procedure in the branch?
Yes No
9. If yes to what extent you understand the manual /Regulation of the branch
Very well
Fair
I did not read
10. Do you think there is a proper system over internal control over cash?
Yes No
11. Is there any training organized over internal control over cash procedure of the bank?
Yes No

III. Internal Control over Cash Collection

12. What are sources of cash collection in the bank?
Customers deposit
Local transfer
Service charge
Any other __________________________________________________
13. In which method did you collect the cash receipts?
__________________________________________________________________
14. Does the organization get some difficulties in collecting in cash?
Yes No
15. If yes what manare did it take?
__________________________________________________________________
16. How many times do you count the cash?
One times Three times
Two times More than three times
17. Did you use any instrument in counting cash?
Yes No
18. If yes which instrument _________________________________________________

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19. Do you make dally reconciliation of cash collected?
Yes No
IV. Control over cash payment
20. What are the possible causes of cash payment?
Customers withdraw
Bank loan
Transfer
Any other _____________________________________________________
21. In which method did you use to cash payment?
____________________________________________________________________
22. How many times do you count the cash before you give to the payee?
One time Two times Three times Four times
23. Do you make daily reconciliation of cash payment with supporting document?
Yes No
24. How do you rectify payment for cheque?
___________________________________________________________________
V. Control over cash on hand
25. Do you think there is proper security over cash on hand?
Yes No
26. If no, what are the possible reasons?
____________________________________________________________________
27. What is the major procedure that made for the control over petty cash?
____________________________________________________________________
28. Where do you put excess cash?
National bank
Head office
Other branch
Other ________________________________________________________
29. Is there any information you can provide me that I fail to ask, but necessary to know?
___________________________________________________________________

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Reference
1. Arens and Loebbecke, E.F(2000), Auditing An integrated Approach, 8th edition
2. Arthur W. Homes, E.F (1966), Principle of Auditing, 12th edition.
3. John W.Cook, E.F (1980), Auditing Philosophy technique, 5th edition.
4. O. Ray Whittington and Kurt Pany, E.F. (2001), Principle of Auditing, 13th edition.
5. Weygant, Kaiso and Kimmel, E.F (1999), Acting Principles, 5th edition.

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