Audit and Assurance Practice Exam

Which of the following is NOT commonly a control for petty cash?

1. Regular surprise counts

2. Maintaining a log of all transactions

3. Having an accountant manage the petty cash fund

4. Having internal audit conduct regular audits of the petty cash fund

The correct answer is: Having internal audit conduct regular audits of the petty cash fund

The correct answer is based on the recognition that while internal audits are a crucial part of an organization's overall control environment, they are not typically classified as direct controls over petty cash itself. Common controls for petty cash funds are generally designed to ensure that the cash is used appropriately and that discrepancies can be quickly identified and addressed. Regular surprise counts serve as a direct control, providing a mechanism to verify the physical cash on hand against the recorded amounts. This helps to identify any instances of misappropriation or errors in recording. Maintaining a log of all transactions is another significant control measure. This log ensures that every disbursement is documented, creating a clear trail that can be reviewed for accuracy and appropriateness. Having an accountant manage the petty cash fund adds a layer of oversight and establishes clear responsibilities for the handling of cash, which helps prevent misuse. In contrast, the role of internal audit is typically more independent and broad, focusing on evaluating the effectiveness of internal controls across the organization rather than being directly involved in the management of specific funds, like petty cash. Internal audits may review the petty cash system periodically, but this is not a direct control mechanism in the same way as the other options listed. Therefore, it is less common to refer to regular audits by