Assessment of internal control over cash ( in case of

Ethiopian Telecommunication corporation Arba Minch

Branch)

College of Business and Economics Department of

Accounting and finance
A senior essay in partial fulfillment of the requirement of
obtaining the bachelor of art's degree in Accounting and
Finance Arba Minch
Prepared by : Esefa Erasa
Advisor Name : Mastewal Dessie (Msc)

Arba Minch : Ethiopia

January / 2022 G.C

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 ACKNOWLEDGMENT
First and for most, I would like to thanks to God for helping me to accomplished this work. Next
I wish to acknowledge my advisor Mastewal Dessie (Msc) for his critical advises and support.
And also thanks to my parents for their unreserved financial and moral support .I also great full
to all of my firnds who contributed their comments and moral support.

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 Abstract
The study focused on internal control over cash in Ethio Telecom .The general objective of doing
this research is to assessed internal control over cash. The internal control process which
historically has been a mechanism reducing instance of froud ,misappropriation and errors has
recently become more extensive addressed on the various risk froud by Ethio Telecom. and to
conducted the study both primary and secondary source of data is used to get fullinformation. the
data analysis thorough discriptive method by using table and percentages forms. Finally some
sort of conclusion and recommendation is forwarded based up the identified problems . the
conclusion and recommendation that given by the researcher use for various institutions for
strangth their internal control over cash.

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Table of Contents
ACKNOWLEDGMENT................................................................................................................ii
Abstract......................................................................................................................................... iii
CHAPTER ONE : INTRODUCTION...........................................................................................1

1.1 BACK GROUND OF THE ORGANIZATION.............................................,......................1

1.2 BACKGROUND OF THE STUD................................................................1
1.3 RESEARCH GAP.............................................................................................................3

1.4 STATEMENT OF THE PROBLEM....................................................................................3

1.5 OBJECTIVE OF THE STUDY...........................................................................................4
1.5.1 General Objective of the Study......................................................................................4
1.5.2 Specific Objective of the Study.....................................................................................4
1.6 SIGNIFICANCE OF THE STUDY.....................................................................................4
1.7 SCOPE OF STUDY.............................................................................................................5
1.8 LIMITATION OF THE STUDY.........................................................................................5
1.9 ORGANIZATION OF THE PAPER...................................................................................5
CHAPTER TWO : THEORETICAL AND EMPIRICAL LITERATURE REVIEW...............6

2.1 THE MEANING OF INTERNAL CONTROL....................................................................6

2.1.1 MEANS OF ACHIEVING INTERNAL CONTROL....................................................7
2.1.2 CLASSIFICATION OF INTERNAL CONTROL.........................................................9
2.1.3 IMPORTANCE OF INTERNAL CONTROL...............................................................9
2.1.4 PRINCIPLES OF INTERNAL CONTROL................................................................10
2.1.5 LIMITATIONS OF INTERNAL CONTROL.............................................................13
2.2 DEFINITION OF CASH....................................................................................................13
2.3 SOURCES AND NATURE OF CASH..............................................................................14

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 2.4 MANAGEMENT OF CASH............................................................................................. 14
2.5 THE NEED FOR CASH CONTROL................................................................................15
2.6 INTERNAL CONTROL OVER CASH RECEIPTS..........................................................15
2.6.1 OVER THE COUNTER RECEIPTS..............................................................................15
2.6.2 MAIL RECEIPTS........................................................................................................... 15
2.7 INTERNAL CONTROL OVER CASH PAYMENTS.......................................................16
2.8 BASIC FEATURES OF THE VOUCHER SYSTEM........................................................16
2.9 PETTY CASH FUND........................................................................................................17
2.10 THE BANK CHECKING ACCOUNT............................................................................18
2.11 BANK RECONCILIATION............................................................................................19
2.12Emparical Leaterature reviw............................................................................................. 21
2.13 Research gap.................................................................................................................... 22
CHAPTER THREE : RESEARCH METHODOLOGY..............................................................23

3.1 Research Design.................................................................................................................23

3.2 Research Approach............................................................................................................ 23
3.3 DATA TYPE AND SOURCE............................................................................................23
3.4 TARGET POPULATION/STUDY POPULATION..........................................................24
3.5 SAMPLING TECHNIQUES............................................................................................. 24
3.5.1 DATA COLLECTION METHODS................................................................................24
3.5.2 DATA ANALYSIS METHOD.......................................................................................24
CHAPTER FOUR....................................................................................................................... 25
4.1 DATA COLLECTION, ANALYSIS AND INTERPRETATION.....................................25
4.2 ANALYSIS AND INTERPRETATION OF DATA OBTAINED THROUGH
QUESTIONNAIRE................................................................................................................. 27
4.2.1 Questions regarding adequate documentation..............................................................27
3.4 Questions related to separation of duties and proper authorization of transaction..............29
4.4 – Questions regarding physical control and effective independent verification of cash.....32
CHAPTER FIVE : CONCUSSIONS AND RECOMMENDATIONS........................................40

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5.1 CONCLUSIONS................................................................................................................40
5.2 RECOMMENDATION..................................................................................................... 41
References................................................................................................................................42

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CHAPTER ONE : INTRODUCTION
1.1 BACK GROUND OF THE ORGANIZATION
The Ethio telecomArba Minch branch was established in 1955 E.c.Arba Minch is in the region of
south nation’s nationalities and peoples region. And it’s found 505 km far from Addis
Ababa.Arba minch is the administrative center of the gamo gofa zone. (Internet)

1.2 BACKGROUND OF THE STUD

Many people interpreted the term internal control as the steps taken by a business of fraud both
misappropriation of assets and fraudulent financial reporting. Others while acknowledging the
importance of internal control for fraud prevention. The definition of internal control is
comprehensive in that it addresses the achievement of objectives in the areas of financial
reporting, operation and compliance with laws and regulations. Internal control also includes
the program for preparing and distributing to various levels of management those current
reports and analyses that enable executives to maintain control over the variety of activities and
functions that are performed in a large organization. cash is a medium of exchange that will
accept for deposits and expense and immediate credit to depositor account that include
currently and coin ,personal check ,bank draft, money order credit card select draft and soon
(planket 1986)

The purpose of a system of internal control is to assure that assets that belong to the business
enterprise are received when tendered, are protected while in the custody of the enterprise and
used only for authorized business purposes. Such a system consists of administrative control and
accounting control. Administrative control includes, but is not limited to, the plan of organization
and procedures and records that are not concerned with the decision processes leading to
management’s authorization of transactions. Such authorization is a management functions
directly also associated with the responsibility for achieving the objectives of the organization
and is the starting point for establishing accounting control of transactions. Accounting control
comprises of the plan of the organization and the procedures and records that are concerned with
the safeguarding of assets the reliability of financial records. among the procedure carefully
prepared cash forces (short term and long term) and investment of idle cash is the major one.

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Cash is a medium of exchange that a bank will accept for deposit and immediate credit to the
depositor’s account. Cash includes currency and coin, personal checks, bank drafts, money
orders, credit card sales drafts, and cashier’s check, as well as money on deposits with banks.
Cash is current asset. Cash is indeed not different from any other assets. However, cash is special
significance for two reasons. First, it is the most readily available asset to meet current
obligations of the business unit. Second, the economic activities of a business involve regular
flow of cash to or from the business.

Because of the ease with which money can be transferred, cash is the most likely to be diverted
and used improperly by employees. In addition, many transactions either directly or indirectly
affect the receipt or payment of cash. It is therefore necessary that cash can be effectively
safeguarded by special controls. One of the major devices for maintaining control over cash is
the bank account. To get the most benefit from bank account, all cash received must be deposited
in the bank and all payments must be made by checks drawn on the bank or from special cash
funds. Cash is a medium of exchange that a bank will accept for deposit and immediate credit to
all the depositor accounts. (Intermediate Accounting ) or Mocich A.n1988 6th edition. Every
business should have a system of internal control over cash that is specifically worked it,s .The
account play a vital role in designing such a system and work with management to establish and
monitor the system in developing internal control over Cash procedure for cash receipt and cash
payment of business .(Morgenstern Melv in2002) or principle of Accounting 2nd edition. Every
large number of cash transaction in modern business involves checks .The paper handling and
recording of cash receipt and cash payment are a vital concern in all type of business. Cash is an
essential asset for every firms but it is also the most early stolen lost or mishandled those would
managed business has careful procedure to control cash and to record cash transaction . If not
protect or control cash in any form may be lost to pilfering in enormous sum to clever schemes
of through the honest mistake. (Smith and Etal 1986)

1.3 RESEARCH GAP

Th
e other researcher show that only the definition of internal control over cash or the researcher not
investigate how to used the effective method of internal control over cash. So the gap of my
research is the effective method of internal control over cash. The effective method of internal

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control over Cash varies depending on the size,nature and complexity of the ethio telecom. Most
company usually large firm follows general procedure.Separate the function of authorization
record keeping and custodian ship of cash Designate a specific people who are responsible for
handling cash.Record all cash receipt promptly Make payment by check rather than by currency
Use bank facility as much as possible and keep the amount of cash on hand to the minimum
balance. Physically protect cash on hand by using cash register and safes. Deposits all cash
receipt promptly

1.4 STATEMENT OF THE PROBLEM

Many business organization is revive or pay a large amount of cash from their customers
and to their suppliers each day and show that cash is the most liquid of all assets . lack of
safeguards and inability to convent excess cash in to earning asses can lead to the Bank
rupcy of the firm

Internal control involves management of company’s asset. Among these asset, cash is the most
liquid asset the need strong internal control. Most of the functions related to cash handling are
the responsibility of the finance department. These functions include handling and depositing
cash receipts, signing checks, investing ideal cash, and maintaining custody of cash, marketable
securities and other negotiable assets.

Because of easy to embezzlement and misappropriation cash needs strong internal control. It has
to control resource particularly its cash because cash is the most liquid asset easily mishandled or
susceptible to theft these cash related activities will be difficult to the organization to be
profitable in order to solve the problems that arises due to internal control system over cashes.
Achievements, however, are dismal. This is because of the problem arising inefficient utilization
of resource. Since cash is an important asset for every company and should properly use its cash.
Companies also need to carefully control access to cash by employees on other. Good accounting
systems both help to manage the amount of cash and control that has access to it. The importance
of accounting for cash is highlighted by the inclusion of a statement of cash flows in complete
set of financial statement. That statement identifies activities affecting cash. Thus, evaluating the
internal control over cash of Ethio Telecom is the main objective of the study .

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EmpiricalEvidences the entire effort of the research is to answer the following major questions
related to the selected problems.

1. Does Ethio Telecom have adequate documentation for cash transaction?

2. Does Ethio Telecom have adequate physical control over cash?
3. Does Ethio Telecom have effective separation of duties?
4. Does Ethio Telecom have proper authorization of transaction?
5. Does Ethio Telecom have effective independent verification of cash?

1.5 OBJECTIVE OF THE STUDY

1.5.1 General Objective of the Study

The main objective of this study was to assess the adequacy of internal control over cash in Ethio
Telecom Arba Minch Branch

1.5.2 Specific Objective of the Study

It tries to address the following specific objectives.

 To assess the existence of adequate documentation for cash

 To assess the existence of adequate physical control over cash
 To assess the existence of separation of duties
 To assess the existence of proper authorization of cash transaction
 To assess the effectiveness of independent verification of cash transaction

1.6 SIGNIFICANCE OF THE STUDY

It is believed that this paper would clearly reflect most of the internal control over cash in Ethio
Telecom and give solutions as to how a financial manager should process potential healthy cash
and under proper follow up measures when problems occur during cash collection and payments.

It would be used as a reference to those individuals who are interested to undertake further
research. It also recommends certain internal control procedures that make internal control
effective.

1.7 SCOPE OF STUDY

The main concern of the study was to see the strength internal control over cash. It is impossible
to encompass all aspects of cash control topics and procedures in this study, that is, because of

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the broadness of the study. So to keep the depth on the quality of the study interesting, the
researcher is, however, limited in the sense that emphasizes on internal control over cash in Ethio
Telecom.

1.8 LIMITATION OF THE STUDY

To conduct this study, the researcher has the following limitations.

- Shortage of time and finance to dig out and explore all possible sources
- Lack of adequate information (secondary source)

1.9 ORGANIZATION OF THE PAPER

The study has the following chapters. The first chapter is about background of the study,
statement of the problems, operational definitions of terms, objective of the study, significance of
the study, scope of the study, limitation of the study and organization. Chapter two deals with
literature review. Chapter three is about, research methodology chapter four is about data
presentation and analysis and the last chapter

deals about summary, conclusion and recommendation.

CHAPTER TWO : THEORETICAL AND EMPIRICAL LITERATURE

REVIEW

2.1 THE MEANING OF INTERNAL CONTROL

Differences of opinion have long existed about the meaning and the objectives of internal
control. Many people have interpreted the term internal control the steps taken by a business to
prevent fraud; both misappropriation of assets and fraudulent financial reporting. Others, while
acknowledging the importance of internal control for fraud prevention, believed that internal
control has an equal role in assuring control over manufacturing and other processes
(Whittington and pany,2000:240). A process, affected by the entity’s board of directors,
managements, and other personnel, designed to provide reasonable assurance regarding the
achievements of objectives in the following categories are, Reliability of financial reporting,

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Effectiveness and efficiency of operations and Compliance with applicable laws and regulations.
The definition of internal control is comprehensive in that it addresses the achievement of
objectives in the case of financial reporting, operations, and compliance with laws and
regulations. Internal control also includes the program for preparing, verifying, and distributing
to various levels of managements those current reports and analyses that enables executives to
maintain control over the variety of activities and functions that are performed in a large
organization.(O.RAY WHITTINGTON AND KURT PANY,2001). COSO’s definition of
internal control emphasizes that internal control is a process, or a means to an end, and not an
end in and of itself. The process is affected by individuals, not merely policy manuals,
documents and forms. By including the concept of reasonable assurance, the definition
recognizes that internal control cannot realistically provide absolute assurance that an
organization’s objectives will be achieved. Reasonable assurance recognizes that the cost of an
organization’s internal control should be not exceeding the benefits expected to be obtained.
Accordingly, the committee of sponsoring organization (COSO) commissioned a study to:
Establish a common definition of internal control to serve the needs of different parties and
provide a standard against which business and other entities can assess their control system and
determine how to improve them. Although internal control is broadly defined, not all controls are
relevant to an audit of financial statements. Generally, the controls that are relevant to an audit
are those that pertain to the reliability of financial reporting that is, those that affect the
preparation of financial information for external reporting purpose. (WEGANT, KAISO AND
KIMMEL 1999).as review of above the paragraph internal control is defined in different way by
different people. Internal control is affected by management of a given organization and that
means the effectiveness of internal control is depended on the structure of the organization.
Internal control is important for the prevention of fraud, misappropriation and damage of assets
of an organization. Internal control is not only for prevention of fraud and for the overall
activities of the given organization. Internal control consists of the plan of organization and all
the related method and measures adapted with in a business to safeguard its assets from
employees theft ,robbery and unauthorized use. Enhance accuracy and reliability of its
accounting records by reducing the risk of errors (unintentional mistakes) and irregularities
(international mistakes and misrepresentation) in the accounting process.

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2.1.1 MEANS OF ACHIEVING INTERNAL CONTROL
Internal control varies significantly from one organization to the next depending on such factors
as their size, nature of operation, and objectives. Yet certain features are essential to internal
control in almost any large scale organization. Internal control of an organization includes five
components: those are The control environment, Risk assessments, The accounting information
and communication system, Control activities and Monitoring.(WHITTINGTON AND PANY
2000)

THE CONTROL ENVIROMENTThe control environment sets the tone of an organization by

influencing the control consciousness of people. It may be viewed as the foundation for the other
components of internal control. Control environment factors include: integrity and ethical values,
commitment to competence, board of directors or audit committee, management philosophy and
operating style, organizational structure, assignment of authority and responsibility, human
resource policies and procedures.

RISK ASSESMENT

Management should carefully identify and analyze the factors that affect the risk that the
organization’s objectives will not be achieved, and then attempt to manage those risks. The
following factors might be indicative of increased financial reporting risk of an organization:
Changes in the organization’s regulatory or operating environment, Changes in personnel,
Implementation of a new or modified information system, Rapid growth of organization,
Changes in technology affecting production process or information system, Corporate
restructurings, Expansion or acquisition of foreign operations and Adoption of a new accounting
principles or changing accounting principles(WHITTINGTON AND PANY)

THE ACCOUNTING INFORMATION AND COMMUNICATION SYSTEM

An organization’s accounting information system consists of the methods and records

established to record, process, summarize and report an entity’s transactions and to maintain
accountability for the related assets, liabilities and equity. Accordingly, an accounting system
should: Identify and record all valid transactions, Describe on a timely basis the transactions in
sufficient detail to permit proper classification of transactions for financial reporting, Measure
the value of transactions in a manner that permits recording the proper monetary value in the

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financial reports, Determine the time period in which transactions occurred to permit recoding of
transactions in the proper accounting period and Present the transactions properly and related
disclosures in the financial statements

CONTROL ACTIVITIES

Control activities are policies and procedures that help ensure that management’s directives are
carried out. These policies and procedures promote actions that address the risks that face the
organization. Performance reviews, information processing, physical controls, segregation of
duties are types of control activities performed by an organization.

MONITORING

Monitoring is a process that assesses the quality of internal control over time. Monitoring can be
achieved by performing ongoing activities or by separate evaluations. Ongoing monitoring
activities include regularly performed supervisory and management activities, such as continuous
monitoring of customer complaints, or reviewing the reasonableness of management reports.
Separate evaluations are monitoring activities that are performed on a non-routine basis, such as
periodic audits by internal auditors.(WHITTINGTON & PANY, 2000:240-251). As review of
the above paragraph internal control varies significations from one organization to another
organization and it’s an essential for a given organization and it has the following components
control environment, risk assessment, accounting information and communication system,
control activities and monitoring.

2.1.2 CLASSIFICATION OF INTERNAL CONTROL

Internal control maybe characterized as either administrative control or accounting control.

Administrative CONTROLS: It relates to the internal control objectives of efficient operations

and adherence to managerial policies. It includes, but is not limited to, the plan of organization
and the procedures and records that are concerned with the decision processes leading to
management’s authorization of transactions. Such authorization is a management function
directly associated with the responsibility for achieving the objectives of the organization and is
the starting for establishing accounting control of transactions. It includes those control

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techniques leading to management’s transaction authorization function and therefore relates only
indirectly to reported external financial information.

ACCOUNTING CONTROL: Accounting control on the other hand, relate primarily to

safeguarding of assets and reliability of financial information. It comprises the plan of
organization and the procedures and records that are concerned with the safeguarding of the
assets and the reliability of financial records and consequently are designed to provide
reasonable assurance that: Transactions are executed in accordance with management’s general
or specific authorization, Transactions are recorded as necessary: to permit preparation of
financial statement in conformity with GAAP or any other criteria applicable to such statements,
and to maintain accountability of assets, Access to assets is permitted only in accordance with
management’s authorization, The recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with respect to any
differences accounting controls includes control techniques in effect thereafter and related
directly to financial information. (DAVID N. RICCHIVTE, 1982:227). As review of the above
paragraph internal control classified as accounting control and administrative control.
Accounting control is related primarily to safeguarding of assets and reliability of financial
information. And administrative controls related with managerial policies of an organization.

2.1.3 IMPORTANCE OF INTERNAL CONTROL

A 1947 publication by the AICPA entitled internal control cited the following factors as
contributing to expanding recognition of the significance of internal control: The scope and size
of the business entity has become so complex and widespread that management must rely on
numerous reports and analyses to effectively control operations, The check and review inherent
in a good system of internal control afford against human weaknesses and reduce the possibility
that errors or protection irregularities will occur and It is impracticable for auditors to make
audits of most companies with in economic fee limitations without relying on the client’s system
of internal control

The national commission on fraudulent financial reporting reemphasizes the importance of

internal control in reducing the incidence of fraudulent financial reporting. This includes the
following: Of overriding importance in preventing fraudulent financial reporting is the “tone set
by the management” that influences the corporate environment within which financial reporting

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occurs, All public companies should maintain internal control that will provide reasonable
assurance that fraudulent financial reporting will be prevented or subject to early detection.
(C.BOYTON & G.KELL, 1995:253-254)

2.1.4 PRINCIPLES OF INTERNAL CONTROL

To safeguard its assets and enhance the accuracy and reliability of its accounting records, a
company follows specific control principles. The following are the types of principles applied to
most enterprises: Establishment of responsibility, Segregation of duties, Documentation
procedures, Physical, mechanical and electronic controls, Independent internal verification and
other controls

Establishment of Responsibility

An essential characteristic of internal control is the assignment of responsibility to specific

individuals. Controls are most effective when only one person is responsible for a given tax.
Establishing responsibility includes the authorization and approval of transactions.

Segregation of Duties

This principle also identified as the separation of function or division of work is indispensable in
a system of internal control. There are two common application of this principle: The
responsibility for related activities should be assigned to different individuals. The responsibility
for establishing the accountability for an asset should be separate from the physical custody of
the asset (ARTHUR W, HOMES: 1966)

Documentation Procedures

Documents provide evidence that transactions and events have occurred. For example, being the
shipping document indicates that the goods have been shipped, and the sales invoice indicates
that the customers have been billed for the goods. Documentation of transaction should be made
when the transaction occurs. Several procedures should be established for documents.

First, whenever possible, documents should be pre numbered and all documents should be
accounted for. Pre numbering helps to prevent a transaction from being recorded more than once
or to prevent the transaction from not being recorded.

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Second, documents that are source documents for accounting entries should be promptly
forwarded to accounting to help ensure timely recording of the transaction and event. Thus, this
control measure contributes directly to the accuracy and reliability of the accounting records.

Physical, Mechanical and Electronic Controls

Physical controls relate primarily to the safeguarding of assets. Such controls include: Safe and
vaults to store cash before it is deposited, Bank safety deposit boxes for important business
papers, Locked ware houses for inventories, Fencing of company property, Locked shortage
cabinets for accounting records and, Self-contained computer facilities with pass-key access by
authorized personnel

Physical control extends to the use of employee identification badges and security guards to
prevent unauthorized entry during business hours. In addition, outside security agencies may be
engaged to protect company properties after business hours. Mechanical and electronic
equipment enhance the accuracy and reliability of the accounting records. For example, in
executing transactions, in recording transactions, electronic data processing systems have:Built-
in hardware controls that promptly detect any manufacturing of the equipment and, Program
control that reject invalid transaction (in PVT) data and procedure error and exception reports.
(WEGANT, KAISO AND,KIMMEL1999)

Independent Internal Verification

It is also called independent check. This principle involves the review, comparison, and
reconciliation of data prepared by one of several employees. The benefit from this principle:

The verification should be made periodically or on a surprise basis, An employee who is

independent of the personnel responsible for the information should do the verification and
Discrepancies and exceptions should be records to a management level that can take appropriate
corrective action.

Independent internal verifications especially useful in comparing recorded accountability with

existing assets. In large companies, independent internal verification is often assigned to internal
auditors.

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Other Controls

Other control measures include the following: Bonding of employees who handle cash

Bonding involves fidelity insurance protection against misappropriation of assets by

dishonest employees. This measure contributes to the safeguarding of cash in two ways.
First, the insurance company carefully screens all individuals before adding them to the
policy and may reject risky applicants.
Second, bonded employee knows that the insurance company will vigorously prosecute
all offenders, Rotating of employees’ duties and requiring employees to take vacations
These measures are designed to deter employees from attempting any thefts since they
will not be able to permanently conceal their improper actions. For example, many bank
embezzlements have been discovered when the perpetrator has been on vacation or
assigned to a new position. (KIESO, 1992:277-281). As review of the above paragraph
internal control has its own principle which helps an organization to safeguard its assets
and enhance the accuracy and reliability of its accounting records. The principles are
establishment of responsibility, segregation of duties, documentation procedures,
physical, mechanical and electronic controls, independent internal control verification
and other controls.

2.1.5 LIMITATIONS OF INTERNAL CONTROL

Internal control can provide only reasonable assurance to management and the board of directors
regarding the achievement of entities objectives. The following are limitations of internal
control:

Mistake in judgments: Occasionally, management and other personnel may exercise poor
judgment in making business decisions, because of inadequate information, time constraints or
other pressures.

Breakdowns: Breakdowns in established controls may occur because personnel may

misunderstand instruction or may make errors due to carelessness, distractions or fatigue.
Temporary or permanent changes in personnel or in systems or procedures may also contribute
to breakdowns.

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Collusion: Individuals acting together, such as employee who performs important control acting
with other employee, customer or supplier may be able to perpetrate and conceal an irregularity
to prevent its detection by the internal control structure.

Management override: Management can overrule prescribed policies or procedures for

illegitimate purposes such as personal gain or enhanced presentation of an entity’s financial
condition or compliance status. Override practices include making deliberate misrepresentations
to auditors and others such as by issuing false documents to support the recording of fictitious
sales transaction.

Costs versus benefits: The costs of an entity’s internal control structure should not exceed the
benefits that are not expected to ensure. Because precise measurement of both costs and benefits
usually is not possible. Management must make both qualitative estimates in judgments in
evaluating the cost-benefit relationship. As review of the above paragraph internal control has its
own limitation this are mistake in judgments, breakdowns, collusion, management override,
costs versus benefits.

2.2 DEFINITION OF CASH

Cash is a medium of exchange that a bank will accept for deposit or immediate credit to the
depositor’s account. Cash includes currency and coin, personal checks, bank drafts, money order,
credit card sales drafts and cashiers’ checks, as well as money on deposit with banks. Items
sometimes confused with cash include postage stamps, postdated checks and IOUs.

Postage should be classified as a short term repayment; postdated checks and IOUs should be
classified as receivables. (MOSICH A.N., 1989: 293-294)

2.3 SOURCES AND NATURE OF CASH

Cash normally includes general, payroll, petty cash and less frequently savings accounts. General
accounts are checking accounts similar in nature to those maintained by individuals. Cash sales,
collection of receivables and investment of additional capital increase the account; business
expenditure decreases it. Payroll and petty cash accounts are “imp rest” at a low balance. When
payroll is paid, a check from the general account is drowning to deposit funds into the payroll
account.

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Cash equivalents are often combined with cash items to create the current asset classification
called “cash and cash equivalents”. Cash equivalents include money market funds, certificates of
deposits, savings certificates and other similar types of assets.

Normal internal control activities (e.g. reconciliation of bank accounts) detect most errors that
occur in these accounts. On the other hand, the liquid nature cash increases the risk of undetected
fraud. (WHITTINGTON & PANY, 2000:383)

2.4 MANAGEMENT OF CASH

The management of cash is of major importance in any business enterprise because cash is a
means of acquiring goods and services. The management of cash generally centered on
forecasting and internal control. The responsibilities of management with respect to cash are: To
ensure that there is sufficient cash to carry on the operation, to invest any idle cash andante
prevent loss of cash due to theft or misappropriation

Cash forecasting is necessary for the proper planning of future operations and to assure that cash
is available when needed, but that cash on hand is not excessive. Internal control is necessary to
assure that the cash is used for proper business purposes and not wasted, misused or stolen.
(MOSICH A.N, 1989:293-294)

2.5 THE NEED FOR CASH CONTROL

Just as cash is the beginning of a company’s operating cycle, it is usually the starting point of the
company’s system of internal control. Cash is the one asset that is readily convertible into other
type of asset; it is easily concealed and transported; and it is highly desired. Because of these
characteristics; cash is the asset most susceptible to improper diversion and use.

Moreover, because of the large volume of cash transactions, numerous errors may occur in
executing and recording cash transactions. To safeguard cash and to assure the accuracy of the
accounting records for cash, effective internal control over cash is imperative. (FESS WARREN,
16th ed: 280)

2.6 INTERNAL CONTROL OVER CASH RECEIPTS

Cash receipts may result from a variety of sources: cash sales, collections on account from
customers, the receipts of interests, rents and dividends, investments by owners, bank loans and
proceeds from the sale of noncurrent assets. Internal control principles apply to cash receipts

14
transactions. Control measures for a retail store that has both over the counter and mail receipts
are described below.

2.6.1 OVER THE COUNTER RECEIPTS

Control over the counter receipts is centered on cash registers that are visible to customers. When
a cash sale occurs, the sale is “rung up” on a cash register with the amount clearly visible to the
customer. This procedure prevents the cashier from ringing up a lower amount and pocketing the
difference. The cashier registers a cash sale manually by punching the appropriate keys on the
register or electronically by using electronic scanning equipment.

2.6.2 MAIL RECEIPTS

However, mail receipts resulting from billings and credit sales are by far the most common way
cash is received by the greatest variety of businesses. All mail receipts should be received in the
presence of the two mail clerks. These receipts are generally in the form of checks or money
orders and frequently accompanied by a remittance advice stating the purpose of the check. Each
check should be promptly endorsed “for deposit only” by use of a company stamp. This
restrictive endorsement reduces the likelihood that the check will be diverted to personal use
because banks will not give an individual any cash under this type of endorsement. (KIESON,
1992)

2.7 INTERNAL CONTROL OVER CASH PAYMENTS

It is common practice for business enterprise to require that every payment of cash be evidenced
by a check signed by a designated official. As an additional control, some firms require two
signatures on all checks or only on checks which are larger than a certain amount. It is also
common to use a check protector, which produces amounts in the check that are not easily
removed or changed.

Disbursing officials are seldom able to have such a complete knowledge of affaires. However
enterprises of even moderate size, the responsibility for issuing purchase orders, inspecting
goods received, and verifying contractual and arithmetical details of invoices is divided among
the employees of several departments. It is desirable, therefore, to coordinate these related
activities and to thank them with the final issuance of checks to creditors.

15
2.8 BASIC FEATURES OF THE VOUCHER SYSTEM
A VOUCHER SYSTEM: is made up of records, methods and procedures used in proving and
recording liabilities and in making and recording each payment.

A voucher system uses: Vouchers, A voucher register, A file for unpaid vouchers, A check for
register and file for paid vouchers

VOUCHERS: It means any document that serve as proof of authority to pay cash, such as an
invoice approved for payments, or as evidence that cash has been paid, such as a concealed
check. It is a special form on which is recorded relevant data about a liability and the details of
its payment. Vouchers are prepared by the accounting department on the basis of an invoice or
memorandum that serves as proof of expenditure. This is usually done only after the following
comparisons and verifications have been completed and noted on the invoice: Comparison of the
invoice with the copy of the purchase order to verify quantities, prices and terms, Comparison of
the invoice with the receiving report to verify receipt of the items billed and Verification of the
arithmetical accuracy of the invoice

VOUCHER REGISTER: After approval by the designated official, each voucher is recorded in
a journal known as register. When a voucher is paid, the date of payment and the number of the
check are inserted in the proper columns in the voucher register.

UNPAID VOUCHER FILE: After a voucher has been recorded in the voucher register, it is
filed in an unpaid voucher file, where it remains until it is paid. When a voucher is to be paid, it
is removed from the unpaid voucher file and a check is issued in payment.

Paid vouchers and the supporting documents are often run through a concealing machine to
prevent accidental or intentional reuse.

CHECK REGISTER: It is a modified form of the cash payments journal and is so called because
it is a complete record of all checks. It is common to record all checks in the check register in
sequential order, including occasional checks that are voided because of an error in their
preparation.

PAID VOUCHER FILE:- After payment, vouchers are usually filled in numerical order in paid
voucher file. They are then readily available for examination by employees or independent

16
auditors needing information about certain expenditure. Eventually the paid vouchers are
destroyed according to the firm’s policies, concerning the retention of records. (FESS
WARREN: 287-291)

2.9 PETTY CASH FUND

A petty cash fund is a cash fund used to pay relatively small amounts. The operation of a petty
cash fund often called an imp rest system, involves: Establishing the fund, Making payments
from the fund and Replenishing the fund

ESTABLISHING THE FUND

An essential step in establishing a petty cash fund is the appointment of a petty cash custodian
who will be responsible for the fund. Also, the size of the fund must be determined. Ordinarily,
the amount is expected to cover anticipated disbursements for a 3 to 4 week period. When the
fund is established, a check payable to the petty cash custodian is issued for the stipulated
amount. Most petty cash funds are established on a fixed amount basis.

MAKING PAYMENTS FROM THE FUND

The custodian of the petty cash fund has the authority to make payments from the fund that
conforms to prescribed management policies. Usually, management limits the size of the
expenditures that may be made and does not permit use of the fund for certain types of
transactions such as making short term loans to employees.

Each payment from the fund must be documented on a pre-numbered petty cash receipts or petty
cash voucher. The sum of the petty cash receipts and money in the fund should equal the
established total at all times. No accounting entry is made to record a payment at the time it is
made from the petty cash.

REPLENISHING THE FUND

When the money in the petty cash fund reaches a minimum level, the fund is replenished. The
request for reimbursement is initiated by the petty cash custodian. This individual prepares a
schedule of the payments that have been made and the sends the schedule, supported by petty
cash receipts and other documentation, to the treasurer’s office. The receipts and supportive

17
documents are examined in the treasurer’s office to verify that they were proper payments from
the fund. At the same time, all supporting documentation is stamped “paid” so that it can not be
to again for payment.

A petty cash should be replenished at the end of the accounting period records of the cash in the
fund. Replenishment at this time is necessary in order to recognize the effects of the petty cash
payments on the financial statements. Internal control over petty cash is strengthened by: Having
a supervisor make surprise counts of the fund to ascertain whether the paid vouchers and fund
cash equal imp rest amount andCanceling or mutilating the paid vouchers so they cannot be
resubmitted for reimbursement (KIESO, 1992: 295-297)

2.10 THE BANK CHECKING ACCOUNT

A checking account is a money balance maintained in the bank that is subjected to withdrawal by
the depositor, or owner of the money on demand.

THE SIGNATURE CARD: A bank requires a new depositor to complete a signature card,
which provides the signatures of persons authorized to sign checks drawn on an account. The
bank retains the card and uses it to identify signatures on chicks paid by the bank. The bank does
not compare every check with this signature card. Usually, it makes a comparison only when a
depositor disputes a validity of a check paid by the bank or when a check for an unusually large
sum is presented for payments.

DEPOSIT TICKET: When depositors make a deposit, they prepare a deposit ticket or slip. A
deposit ticket is a form that shows the date and the time that make up the deposit. The ticket is
often preprinted to show the depositor name, address and account number. Items comprising the
deposit cash and a list of checks are entered on the ticket when the deposit is made. After making
the deposit, the depositor is given a receipt showing the date of the deposit and the amount
deposited.

CHECK: A check is a written order on a bank to pay a specific amount of money to the party
designated as the payee by the party issuing the check. Thus, every check transaction involves
three parties: The bank, the payee (party to whom the check is made payable) and The drawer
(depositor)

18
Most depositors use serially numbered checks that are preprinted with information about the
depositor, such as name, address, and telephone number. Often a business check will have an
attached remittance advice. A remittance advice informs the payee why the drawer (or maker) of
the check is making the payment.

BANK STATEMENTS: A bank statement is a statement issued by a bank describing the

activities in a depositor’s checking account during the period. A bank statement includes the
following: Deposit made to the checking account during the period, Checks paid out of the
depositor’s checking account by the bank during the period. Theses checks have been cleared by
the bank and are cancelled, other deductions from the checking account for items such as service
charges, NSF checks, and safe deposit box rent, and checking printing fee. This is so called debit
memorandum and other additions to the checking account for items such as proceeds of a note
collected by the bank for the depositor and interest carried on the account. This is also called
credit memorandum. (KIESO, 1992:383-384)

2.11 BANK RECONCILIATION

Because the bank and the depositor maintain independent records of the depositor’s checking
account, it might be presumed that the respective balances will always agree. In fact, the two
balances are seldom the same at any given time, and it is necessary to make the balance per
books agree with the balance per bank, a process called reconciling the bank account.

The lack of agreement between the two balances is due to: Time lag that prevent one of the
parties from recording the transaction in the same period and Errors by either party in recording
transactions

Time lags occur frequently, for example, several days may elapse between the times a check is
paid by the bank. Similarly, when the depositor uses the bank’s night depository to make its
deposits, there will be a difference of one day between the time the receipts are recorded by the
depositor and the time are recorded by the bank. A time lag also occurs whenever the bank mails
a debit or a credit memorandum to the depositor.

RECONCILIATION PROCEDURES:

19
To obtain maximum benefit from the bank reconciliation, the reconciliation should be prepared
by an employee who has no other responsibilities pertaining to cash.

In reconciling the bank account, it is customary to reconcile the balance per books and balance
per bank to their adjusted or correct cash balances. The reconciliation is divided into two
sections: the first is to enter the balance per bank statement and the second is balance per book.

The following steps should reveal all the reconciling items that cause the difference between the
two balances. Compare the individual deposits on the bank statement with deposit in transit from
the preceding bank reconciliation and with depositor’s records. Deposit not recorded by the bank
represents deposit in transit and add to the balance per bank., Compare the paid checks shown on
the bank statement or the paid checks returned with the bank statement with check outstanding
from the preceding bank reconciliation and checks issued by the company as recorded in the cash
payments journal. Issued checks that have not been paid by the check represent outstanding
checks that are deducted from the balance per the bank, Note any errors discovered in the
forgoing steps and list them in the appropriate section of the reconciliation schedule. All errors
made by the depositor are reconciling items in determining the adjusted cash balance per book.
In contrast, all errors made by the bank are reconciling items in determining the adjusted cash
balance per the bank and Trace bank memoranda to the depositor’s records. Any unrecorded
memoranda should be listed in the appropriate section of the reconciliation schedule.

As review of the above paragraph cash is monetary value which used as medium of exchange
and the bank can accept it’s at face value. Cash is the most liquid asset among different assets of
the organization and internal control over this asset is an important. There is different internal
control over cash among this internal control over cash receipts and over cash disbursement or
payments. Cash receipts can be made in different ways through mail, direct deposits and etc.
cash payments made through checks, voucher register and etc. and these payments can be made
from general fund, petty cash and the like. Finally, cash as per the bank record and a s per the
depositor may not in agreement because of delay and errors made by either parties thus the bank
prepare bank statement which show the cash balance as per the bank and the organization
prepare bank reconciliation to arrive at the correct cash balance of the organization.

20
2.12 Emparical Leaterature reviw
Merga Abaya 2006 study on the assessment of internal control in order to analysis the factors
that afflicting internal control over cash .his finding was the internal control over cash used to
solve problem related to internal control over cash. The researcher was recommended in order to
make internal control adequate the controller must exercise surprise cash count give a high
priority.

Agumasie bantie ( 2007) studied on the assessment of internal control over cash in water survise
in his finding was the techniques used by the organisation to control its cash . How is design and
implemente internal control system over cash payment and cash receipts control system. The
researcher was recommended based on the above finding internal auditor should contribute to the
strength of internal control over cash system.

Rigibe Tekulu (2007) has done a research an assessment of internal control over cash to analysis
the factor that affects internal control over cash . the researcher was raised some problem those
are inadequate system of control over petty cash week daily record keeping and reporting ,lack of
daily counting the cash receipts and payment. Based on the above problem the researcher was
recomanded segregate of duty,daily record keeping of the transaction is an important point and
company should use secret guard or locked briefcase while the cashier physically move the cash
to and from the bank.

Eney Ayalew (2005) has done a research on assessment of internal control over cash in order to
analysis the factor that affecting internal control over cash and investigate some difficult faced at
the time of cash receipts and payments .The problems raised by the researcher were : lack of
segregation of duty unacquainterecorded keeping and report of daily transaction and carilessness
of employees . Based on the above problem the researcher recommended the organisation should
separate employee duity who revive cash and employees who record cash receiptbecause this is
important to discourage to cover any third.

2.13 Research gap

According to the previous research the researcherwas describeor study on internal control over
cash by using purposive method of sampling technique.the researcher show that only the
diffinition of internal control over cash or the researcher not investigate how to used the effective

21
method of internal control over cash . the gap of this research is the effective method of internal
control over cash is listed from my research

CHAPTER THREE : RESEARCH METHODOLOGY

To address the objectives of the research, the following methodologies of data collection and
analysis were used.

3.1 Research Design

A research design is a general strategy for attaining the information require to address a research
problem(chandra et al. 2010). This means an arrangement of condition for collection and
analysis of data in a manner that aims to combine relevance to the research purpose with
economy in procedure. I fact, the research design in the conceptual structure with in which
research is conducted, it consists of the blue print for the collection, measurement and analysis of
data(CR.kothari-year of edition).From different categories of research design studies, l was used
descriptive design. Because this research concerned with describing the characteristics of a
particular individual, or a group that is to identify Assessment of internal control over cash (in
case of Ethiopian Telecommuncation corporation Ariba Minch Branch).

3.2 Research Approach

When conductig a research, there are different ways of approaching the problem. According to
cruswell(2009),there are three aproaches of research, quantitative, qualitative and mixed. Is
conduct my research, to inter or identify the variables or list the factors. I was follow the mixed
approach of research. Because of involves the generation of data in quantitative and qualitative
form.

22
3.3 DATA TYPE AND SOURCE
To realize the objective, the researcher was used both primary and secondary data sources. The
primary data was collected through pre-set structure questionnaire and secondary sources are
primarily to give comprehensive and conceptual foundation for the study at hand. Extensive
review of available literature on the subject previously conducted studies related to this study.
Various published and unpublished materials were used in this respect.

3.4 TARGET POPULATION/STUDY POPULATION

The target population of the study are employees of Arba Minch Branch ,These are work on
Ethio Telecom . These employees are a target population .Total employees in Ethio Telecom
Arba Minch Branch are 15 employers/workers/

3.5 SAMPLING TECHNIQUES

The sampling technique used data collection was purposive sampling. When a researcher choose
specific people within the population to use for a particular study or research project. Unlike
random studies, which deliberately include diver’s cross section of age, back ground and culture?
Two ideas behind purposive sampling is to concentrate on people with particular characteristics
who would better be above to assist with relevant research. One of the benefit of this sampling
method is the ability to gather larger amount of information by using arranges of different
techniques.

3.5.1 DATA COLLECTION METHODS

The questionnaires were used to find different information from employees of Ethio Telecom –
Arba Minch Branch. The participant filled the structure questionnaires and returns them on the
due time.

3.5.2 DATA ANALYSIS METHOD

The collected data are tabulated, analyzed, interpreted using coding and percentage to determine
the response rate. Hence, the research was mainly descriptive in nature.

23
 CHAPTER FOUR
4.1 DATA COLLECTION, ANALYSIS AND INTERPRETATION
This part of the study deals with analysis and interpretation of questionnaires distributed to
employees of Ethio Telecom Arba Minch branch, important data regarding;

 Adequate documentation
 Separation of duties and proper authorization of transaction
 Physical control and effective independent verification of cash

The total numbers of questionnaires that are distributed are 15 for junior clerk, senior clerk,
accountant, and senior accountant and team leaders of the Ethio Telecom Arba Minch branch
and out of these questionnaires 15 has been filled and returned. In this regard, every employee
was very helpful in returning the questionnaires on time.

The following table shows the employee (respondent) personal background; including the
employee’s gender, educational background, their position and work experience.

Table 4.1.1: Personal background of the respondents (employees

N o i t e m R e s p o n d e n t

N o percentage

1 s e x M a l e 4 2 6 . 7 %

F e m a l e 1 1 7 3 . 3 %

24
 t o t a l 1 5 1 0 0 %

2 Educational back ground C e r t i f i c a t e - -

D i p l o m a 1 6 . 7 %

B . A d e g r e e 1 3 8 6 . 7 %

M.A and above 1 6 . 7 %

t o t a l 1 5 1 0 0 %

3 P o s i t i o n Junior clerk 4 2 6 . 7 %

Senior clerk 2 1 3 . 3 %

A c c o u n t a n t 5 3 3 . 3 %

Senior accountant 2 1 3 . 3 %

Team leade r 2 1 3 . 3 %

t o t a l 1 5 1 0 0 %

4 Work experience 0 _ 5 5 3 3 . 5 %

6 _ 1 0 2 1 3 . 3 %

1 1 _ 1 5 5 3 3 . 3 %

A b o v e 1 5 3 2 0 %

t o t a l 1 5 1 0 0 %

(Source of questionnaire, 2022)

As it is indicated in the table 1 above, 4 (which is 26.7%) are male and the remaining 11(which
are 73.3%) are Female.

25
The next table shown as, 1 (which is 6.7%) are diploma. The numbers of respondents who have
first degree are 13 (which are 86.7%) and the number of M.A and above are 1 (which are 6.7%).
This indicates that most of the employees are above diploma.

With respect to position of respondents, 4(which is 26.7%) junior clerks, 2 (which is 13.3%) are
senior clerks, 5(which is 33.3%) are accountants, 2 (which is 13.3%) are senior accountants and
2 (which is 13.3%) are team leaders. This indicates that the majority of the respondents position
is in the middle of the management level can be a good source of having adequate information.

In terms of years of experience, 5 (which is 33.3%) of the respondents have served for 0-5
years,2 (which is 13.3%) of the respondents have 6-10 service years, 5 (which is 33.3%) of the
respondents have 11-15 service years and 3 (which is 20%) of the respondents have a service of
life or above 15 years. This indicates that the majority of the respondents have stayed long in the
Ethio Telecom and this has the advantage of securing relevant data. From these the researcher
can conclude theEthio Telecom employee is above diploma and their position is good and they
able to give good information and help the Ethio Telecom to accomplish its activities in effective
way.

4.2 ANALYSIS AND INTERPRETATION OF DATA OBTAINED THROUGH

QUESTIONNAIRE

4.2.1 Questions regarding adequate documentation

Table4.2.2: Indicates checks presented for signature

Question no 5 does Ethiotelecomalwayscheck ac ompanied bysup ortdocumentwhenpresentedfor signature n o R e s p o n s e R e s p o n d e n t

n o percentage

1 Y e s 1 5 100%

N o - -

T o t a l 1 5 100%

(Source of questionnaire, 2022)

26
According to the above table, 15 (100%) of the respondents assured that the Ethio Telecom
always checks accompanied by supported documents and presented for signature. In addition,
before the preparation of bank payment voucher, the validity of supporting documents insure and
properly compare purchase orders, supplier invoice and receiving notes and other relevant
documents. From above the researcher can conclude that the Ethio Telecom accomplished its
activities in accordance with the procedures of internal control. Because the Ethio Telecom
checks supporting documents when presented for signature.

Table -4.2.3: Indicates check payments and petty cash payments

Question no 6 Dose you Ethiotelecom use check payment voucher and pety cashvoucher payment for payment system ? n o R e s p o n s e R e s p o n d e n t

n o percentage

1 Y e s 1 3 86.7%

2 n o 2 13.3%

T o t a l 1 5 100%

(Source of questionnaire, 2022)

According to the above table 13 (86.7%) of the respondents assured that the Ethio Telecom used
checkpayment voucher and petty cash voucher payments for payment system and 2 (13.3%) of
the respondents said the responsible are not uses check payment voucher and petty cash voucher
payment system. Hence, the researcher can conclude that their Ethio Telecom mostly prepared a
petty cash voucher and check payment voucher approved by a designated person. The reason is
to avoid bulky documentation.

Question NO 7: Who is responsible for the custody of unused documents like receipt, checks
etc…?

27
All the respondents said that the responsibility of the custody of unused documents like receipt,
checks etc… are under Account Control Section. This shows that the researcher’s finding the
custody of unused documents, such as check, receipts are under safe of the custodian and have
their own register which shows the in and out movement and new checks paid is issued after the
return of the used one. Hence, the researcher can infer the unused checks are safely protected
under account control section.

In general the overall adequate documentation and record are performed in the Ethio
TelecomArba Minch Branch.

3.4 Questions related to separation of duties and proper authorization of transaction

Table -4.3.1: Shows the responsibilities of making entries or maintaining account
receivable records.

Question no 8 Does the cashier have a responsibility for making entries in a ledger or maintaining ac ount receivable n o R e s p o n s e No respondent

n o percentage

1 Y e s 7 46.7%

2 N o 8 53.3%

T o t a l 1 5 100%

(Source of questionnaire, 2022)

According to the above table, 7(46.7%) of the respondents said the cashiers are responsible for
making entries in a ledger or maintaining account receivables and the remaining 8(53.3%) of the
respondents indicate that the cashiers are not responsible for making entries in a ledger or
maintaining account receivables.

In general, Most Ethio Telecom are not involved in any accounting and making entries in ledger
record keeping activities

28
Thus, the researcher can conclude that there is proper segregation of different operations among
the employees to prevent collision and safe guard the cash receipts.

Table -4.3.2: Indicates preparing reconciliation

Question no 9 is the person preparing the reconciliation Description n o R e s p o n s e No respondent

n o Parentage

I. Prevented from signing check? 1 Y e s 1 3 86.7%

2 N o 2 13.3%

T o t a l 1 5 1 0 0 %

II.Prevented from handling cash? 1 Y e s 1 5 1 0 0 %

2 N o - -

T o t a l 1 5 1 0 0 %

III.Pervented from cash transaction? 1 Y e s 1 2 8 0 %

2 N o 3 2 0 %

T o t a l 1 5 1 0 0 %

(Source of questionnaire, 2022)

According to the above table item I, 12(80%) of the respondents said that the person preparing
the reconciliation are prevented from signing checks and 3(20%) of the respondents replied that
the preparing the reconciliation are not prevented from signing checks.

And also as observed from the above table item II, 15(100%) of the respondents replied that the
person preparing the reconciliation are prevented from handling cash.

Additionally, in the above table item III, 12(80%) of the respondents replied that the person
preparing the reconciliation are prevented from recording cash transaction and the remaining

29
3(20%) of the respondents said that the person preparing the reconciliation are not prevented
from recording cash transaction. This shows that the persons preparing the reconciliation are
from signing checks, handling cash and cash transaction recording.

Table -4.3.3: Indicated signed checks

Question no 10 are all person who sign check prohibited Description n o R e s p o n s e R e s p o n d e n t

n o percentage

I. have access to petty cash? 1 Y e s 1 3 8 6 . 7 %

2 N o 2 1 3 . 4 %

T o t a l 1 5 1 0 0 %

II.Aprove cash disbursement? 1 Y e s 1 0 6 6 . 7 %

2 N o 5 3 3 . 3 %

T o t a l 1 5 1 0 0 %

III.Record cash receipts? 1 Y e s 1 2 8 0 %

2 N o 3 2 0 %

T o t a l 1 5 1 0 0 %

IV.Post to the ledger accounts? 1 Y e s 1 3 8 6 . 7 %

2 N o 2 1 3 . 3 %

T o t a l 1 5 1 0 0 %

(Source of questionnaire, 2022)

As shown in the above table item I, 13(86.7%) of the respondents said that all persons who sign
checks are prohibited to have petty cash and 2(13.3%) of the respondents replied that all persons
who sign checks are prohibited to have access to petty cash.

30
Also observed from the table above item II, 10(66.7%) of the respondents replied that all persons
who sign checks are prohibited to approve cash disbursement, whereas 5(33.3) of the
respondents said that all persons who sign checks are not prohibited to approve cash
disbursement.The other table shows that item III, 12(80%) of the respondents said that all
persons who sign checks are prohibited to record cash receipts and the remaining 3(20%) of the
respondents replied that all persons who sign checks are not prohibited to record cash receipts.

Additionally, in the above table item IV, 13(86.7%) of the respondents said that all persons who
sign checks are prohibited to post ledger accounts and 2(13.3%) of the respondents replied that
all persons who sign checks are not prohibited to post ledger accounts.

By this, the researcher can be sure there is proper discharge of duties and responsibilities.

Table -4.3.4: Indicates the responsibility of cash for specific employee

Question no 11 Does the responsibility of cash shall be clear cut with specific employee ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 4 93.7%

2 N o 1 0 . 7 %

T o t a l 1 5 100%

(Source of questionnaire, 2022)

According to the above table all 14(93.3%) of the respondents assured that the responsibility of
cash shall be clear cut with a specific employee in the Ethio Telecom and the remaining 1(6.7%)
of respondents said thatall person are not responsibility of cash shall be clear cut with a specific
employees

In general, the overall internal control system of the Ethio Telecom, especially the segregation of
duty elements, is strong.

31
4.4 – Questions regarding physical control and effective independent verification of
cash
Table4.4.1: Shows performing surprise cash count

Question no 12 Does the Ethiotelecom perform surprise cash cut ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 3 86.7%

2 N o 2 13.3%

T o t a l 1 5 100%

(Source of questionnaire, 2022)

As shown in the above table, 13 (86.7%) of the respondents assured that the Ethio telecom
performs surprise cash count and 2 (13.3%) of the respondents said that all person are not
perform surpriseCash count.

The researcher can conclude that the Ethio Telecom makes surprise cash count every month.
This count is made with the presence of cash and cash holders.

Table -4.4.2 : Indicates cash collection mechanism

Question no 13 Dosethe Ethiotelecom have a limited amount of col ection in cash ( paper money) from customers ? n o R e s p o n s e No respondent

n o percentage

1 Y e s - -

2 N o 1 5 100%

T o t a l 1 5 100%

32
 (Source of questionnaire, 2022)

As shown in the above table, 15 (100) of the respondents assured that the Ethio Telecom are not
limited amount of collection in cash from customers.

In general, the Ethio Telecom has unlimited amount of collection in cash from customers though
liquid cash may encourage the employees for fraudulent actions.

Table -4.4.3: Indicates daily comparison

Question no 14 is total col ection is compared daily with copy of cash receipt, voucher, cash invoice and bank deposit slips ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 3 86.7%

2 N o 2 13.3%

T o t a l 1 5 100%

(Source: questionnaire 2022)

As shown in the above table, 13(86.7%) of the respondents said that the total collection are
compared daily with copy of cash receipt voucher, cash invoices and bank deposit slips and
2(13.3%) of the respondents replied that the total collection are not compared daily with copy of
cash receipt voucher, cash invoices and bank deposit slips.

From this, the researcher findings showed the total collection compared daily with copy of cash
receipt voucher, bank deposit slips and cash invoices.

Table-4.4.4 indicate daily remit of cash collection

Question no 15 Doesyou Ethiotelecom counter remit all collection daily to the cashier n o R e s p o n s e No respondent

33
? n o percentage

1 Y e s 1 1 73.3%

2 N o 4 26.7%

T o t a l 1 5 100%

(Sourceofquestionnaire, 2022)

As shown the above table, 11(73.3%)of the respondents said that all person are counter
cashier remit all collection daily to the cashier and the remaining 4(26.7%)of the
respondents said that all person are not counter cashier remit all collection daily to the
cashier

From this the researcher that the Ethio Telecom most of are strong counters cashier remit
all collection daily to the cashier.

Table -4.4.5: Indicates limits of petty cash

Question no 16 Does you Ethiotelecom have a maximum limit for pet y cash payments ? if the answer is yes write the maximum amount. . . . n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 5 100%

2 N o - -

T o t a l 1 5 100%

(Source: questionnaire 2022)

34
As shown in the above table, 15(100%) of the respondents are assured that the Ethio Telecom
has a maximum limit for petty cash payments. The maximum amount of petty cash payment in
the Ethio Telecom is 10,000 Birr

Table -4.4.5: Indicates preparation of bank reconciliation

Question no 17 Does you Ethiotelecom paper bank reconciliation monthly ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 4 93.3%

2 N o 1 6 . 7 %

T o t a l 1 5 100%

(Source: questionnaire 2022)

As shown in the above table, 14 (93.3%)of the respondents replied that monthly bank
reconciliation is prepared and corrective actions are made based on that monthly bank
reconciliation and the remaining 1 (6.7%)of the respondents said that all person are not
responsible of prepared Bank reconciliation monthly.

The researcher’s conclusion can help the Ethio Telecom direct errors and frauds that may occur
and helps it to have a smooth financial transaction in accounting system. This procedure is meant
to have strong internal control over cash

Table -4.4.6: Indicates deposits of same day

Question no 18 is cash collection deposited on the same day ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 1 73.3%

2 N o 4 26.7%

T o t a l 1 5 100%

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(Source: questionnaire2022)

According to the above table, 11(73.3%) of the respondents said that cash collected deposited on
the same day and the remaining 4(26.7%) of the respondents indicated that cash collection is not
deposited on the same day.From the above the researcher can conclude that the Ethio Telecom
has collect its cash in good way which make its operation effective by solving shortage of cash
on hand.

Table:4.4.7 Indicate safeguarding of cash

Question no 19 why kind of physicalcontrol does Ethiotelecom use to safeguard it's cash while it is custody of d e s c r i p t i o n n o R e s p o n s e No respondent
the firm's ?
n o percentage

I. Use fire safe 1 Y e s 1 3 8 6 . 7 %

2 N o 2 1 3 . 3 %

T o t a l 1 5 1 0 0 %

I . is stored rein forced separate ro m on an area which are restricted only to cuts ? 1 Y e s 1 4 9 3 . 3 %

2 N o 1 6 . 7 %

T o t a l 1 5 1 0 0 %

III. use combination of locks 1 Y e s 1 3 8 6 . 7 %

2 N o 2 1 3 . 3 %

T o t a l 1 5 1 0 0 %

Iv. UseEthiotelecomguard descoun when col ection cash from col ection center and deposit o bank ? others pleas 1 Y e s 1 1 7 3 . 3 %
specify.

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 2 N o 4 2 6 . 7 %

T o t a l 1 5 1 0 0 %

(Source of questionnaires: 2022)

As shown the above table (1) 13(86.7%)of therespondent said that all person are used fire
proof safe and the other remaining 2(13.3%) of the respondent said that all person are not
used fire proof safe. and the next table(2) 14(93.3%)of the respondent said that all person are
stored reinforced separate room on areas which are restricted only to cuts. Whereas the other
remaining 1(6.7%) of the respondent said that all person are not used stored reinforced
separate room on areas which are restricted only to cuts. And the above table (3)
13(86.7%)of the respondent said that all person are used combination of lock's. Whereas the
other remaining 2(13.3%)of the respondent said that all person are not used combination of
lock's. The last table (4) 11(73.3%) of the respondent said that all person are used the Ethio
Telecom guard escort when collection Cash from collection center and deposit to bank ,
where the other remaining 4(26.7%) of the respondent said that all person are not used Ethio
Telecom guard escort when collection Cash from collection center and deposit to bank.
Generally the physical control of Ethio Telecom are strong.
Table -4.4.7 : Indicates deposit repor

Question no 20 Does the cashier pepar collection summery and deposit (daily cash sheet ) daily ? n o R e s p o n s e No respondent

n o percentage

1 Y e s 1 5 100%

2 N O - -

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 T o t a l 1 5 100%

(Source: questionnaire 2022)

As shown in the above table, 15 (100%) of the respondents said that the Ethio Telecom cashier
prepare collection summary and deposit report daily.

In general, the overall physical control system of the Ethio Telecom is strong

Table -4.5: Indicates about the strength of internal control

Question no 21 Do you think internal control is ...? n o R e s p o n s e No respondent

n o percentage

1 V e r y s t r o n g 8 53.3%

2 S t r o n g 7 46.7%

3 Satisfactory - -

4 W e e k - -

5 V e r y w e e k - -

T o t a l 1 5 1 0 0 %

As shown in the above table, 8(53.3%) of the respondents believe and state that very strong
internal control and the remaining 7 (46.7%) of the respondents state that there is strong internal
control system. In general, the researcher can conclude that overall internal control system of the
Ethio Telecom is strong.

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 CHAPTER FIVE

5. CONCLUSIONS AND RECOMMENDATIONS

5.1 CONCLUSIONS
As indicated earlier, the objective of this research was to assess how Ethio Telecom performed in
the internal control over cash and to identify some problems. If any to that end the necessary
steps have been followed to collect relevant data. The instrument used to gather the data are
questionnaires. Based on the data gathered, the study arrived at the following summary and
conclusion.

As can be concluded in the analysis of the data, the accounts department is directly responsible
for internal control over cash. Based on the questionnaires made with the department employees,
the following conclusion and recommendation are listed.

 The Ethio Telecomcollects cash and checks in different collection centers. Even if the
collection is performed with official receipt and recorded properly, huge amount of liquid
cash hold in the custody of the main cashier at safe.
 The Ethio Telecom accepts its income from customers only with cash and check.
 The Ethio Telecom prepares bank reconciliation at the end of each month. The bank
reconciliation is verified by the accounts department. This procedure is a means to have
strong internal control over cash.
 The Ethio Telecom makes a surprise cash count in each month. These counts made with
the presence of cash and cash holder.

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5.2 RECOMMENDATION
Based on the findings of the study, the researcher would like to recommend the following;

 Since cash is the most liquid of all assets and mishandled either through theft or
carelessness, the Ethio Telecom should not hold huge amount of cash in the custody of
the main cashier, rather each day’s cash receipts intact.
 Collecting unlimited amount of income from customers through liquid cash may
encourage the employees from fraudulent action. Therefore, the Ethio Telecom should
create a policy for collection. Little amount through cash and for huge amount through
certified payment order.They should be prepare adequate information about the internal
control over cash system at branch level

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References
Arens and Loebbecke, E.F(2000), Auditing An integrated Approach, 8th edition
Arthur W. Homes, E.F (1966), Principle of Auditing, 12th edition.
Intermediate Accounting (Mosich A.N 1988 6th edition.
John W.Cook, E.F (1980), Auditing Philosophy technique, 5th edition.
O. Ray Whittington and Kurt Pany, E.F. (2001), Principle of Auditing, 13th edition.
Planket Fundamental of Managerial Finance 2nd edition.
Smith and Metal 1986
Weygant, Kaiso and Kimmel, E.F (1999), Acting Principles, 5th edition.

41
 ARBA MIMCH UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
This questionnaire is to fulfill partial requirement for B.A degree in Accounting and finance. The
study is conducted on internal control over cash in ARBA MINCH Branch Ethio Telecom. My
plan is to collect primary data of your Ethio Telecom. Your genuine response is highly valuable
and has great contribution for the quality of my paper. Therefore, I want to say thank you in
advance for your willingness and Ethio telecom giving mevaluable information. Instruction: -
Please indicate your reliable answer for each questions by making “√” in the given answer line.
No need of writing your name.

I - Personal Information

1. Sex Male Female

2. Your educational background is

Certificate B.A Degree

Diploma M.A
3. In which section of the finance department are you working?
Account Section
Budget and disbursement section
Accounts control section
Please mention your position_____________________________
4. Your work experience in Ethio Telecom is:

0 - 5 years 11 – 15 years
6 – 10 years above 15 years
II- Questions regarding adequate documentation
5. Is the Ethio Telecom check always accompanied by supported documents when
presented for signature?
Yes No
6. Does your Ethio Telecom use check payment voucher and petty cash voucher payments
for payments?

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 Yes No
7. Who is responsible for the custody of unused documents like receipt, checks etc…?
_______________________________
III- Questions related to separation of duties and proper authorization of transaction
8. Does the cashier have a responsibility for making entries in ledger or maintaining account
receivable?
Yes No
9. Is the person preparing the reconciliation…..
a. Prevented from signing checks?
Yes No
b. Prevented from handling cash?
Yes No
c. Prevented from recording cash transaction?
Yes No
10. Are all persons who sign checks prohibited to….
a. Have access to petty cash?
Yes No
b. Approve cash disbursements?
Yes No
c. Record cash receipts?
Yes No
d. Post to the ledger accounts?
Yes No
11. Does the responsibility of cash shall be clear cut with specific employee?
Yes No

IV- Questions regarding physical control and effective independent verification of cash

12. Does the Ethio Telecom perform surprise cash count?

Yes No
13. Does the Ethio Telecom have a limited amount of collection in cash (paper money) from
customers?
Yes No
If your answer in the above question is yes, what is the limit?
_______________________________
What method do you use?____________________________________

14. Is total collection compared daily with copy of cash receipt vouchers, cash invoices and bank
deposit slips?

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 Yes No
15. Do you counter cashier remit all collection daily to the cashier ?
yes

16.Does your corporation have a maximum limit for petty cash payments?
Yes No. If your answer is yes, please write the maximum
amount _____________________________
17.Does your corporation prepare bank reconciliation monthly?
Yes No
18.Is daily cash collection deposited on the same day?
Yes No

20.Does the cashier prepare cash collection summary and deposit report (daily cash sheet) daily?
Yes No
21.Do you think your internal control is ……?
Very StrongStrong satisfactory weak Very weak

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