Cash Handling
The Cash Handling domain tests control of cash from the moment it is received until it is deposited and reconciled. Expect questions on receipting, segregation of duties, deposit timeliness, petty cash, physical security, surprise counts, and electronic payment controls. The exam treats cash as uniquely vulnerable because it is bearer value: once taken, it is hard to trace and easy to spend.
Core rules
- Receipt at the point of entry with prenumbered receipts, immediate recording, restricted endorsement, and limited access to the cash drawer.
- Segregate custody, recording, reconciliation, and authorization so no one person controls a transaction end to end.
- Deposit intact and promptly; do not use receipts to cash checks, make change, or fund petty cash.
- Use dual control for counts, safe access, and armored-car pickup; change combinations when staff leave.
- Run petty cash as an imprest fund with receipts, surprise counts, and no IOUs.
- Reconcile independently and timely, review and sign the reconciliation, and investigate differences rather than plugging them.
- Control electronic payments with unique user IDs, refund and void authority, and exception reports.
- Secure blank check stock, signature stamps, and keys; never pre-sign checks or share passwords.
Worked example
A small office has one clerk who receives cash, posts payments, prepares the deposit, and reconciles the bank statement. Reasoning: all four incompatible functions sit with one person, which creates a fraud opportunity and also makes honest error hard to detect. With only one clerk, perfect segregation is impossible, so compensating controls are required: a supervisor opens the bank statement monthly and reviews cancelled images; a second person verifies the deposit; the manager performs surprise counts; and the governing body reviews a monthly report. The control is not “trust the clerk” but independent evidence that someone outside the cash flow checks the work.
Traps that cost marks
- Holding deposits overnight to batch them.
- Letting one person both count and record cash.
- Using receipts for change or check cashing.
- Relying on a reconciliation prepared by the custodian.
- Skipping surprise counts because “nothing has ever gone missing.”
- Assuming insurance replaces controls.