Audit Program: Treasury Audit Program

Audit Procedure Control Objective

I. General Information

The Cash Management Audit Program is designed

to maximize cash flow within the operating
constraints of the business and to ensure that
internal control procedures are in place and
working.
II. Audit Procedures
A. General

Send written communication to Corporate and/or

management level personnel to inform them of the
1.                      audit to be performed and to identify the objective
       and scope of the review.

2.                      Hold a meeting with all staff members to discuss

       audit objectives, concerns and staff responsibilities.
3.                      Prepare a time budget for the audit performed.

4.                      Prepare a standardized audit program detailing

       substantive testing to be performed.
Communicate all audit concerns to the auditee in an
5.                      exit conference.
Document all audit findings/concerns in a formal
6.                      audit report.
B. Bank Account Review

Determine whether Scholastic’s Treasury

department utilizes a daily balance reporting
1.                      workstation for obtaining available fund
   information.
If automated balance reporting is used, for which
a. accounts is the information obtained?

If an automated balance reporting system is not

used, include in a narrative how the Treasury
department determines available funds, particularly
in the concentration accounts, and the type of
b. information retained.

Determine if the cash management procedures are

2.         documented.
 Have these procedures been communicated to the
banks in question? Have they communicated with
banks on how much they should sweep on a daily
a. basis, accounts they should be transferred to, etc.

3.                      Obtain a list of all Scholastic’s bank accounts and

   bank reconciliations for the selected testing periods.

4.                      Review the access right to the banking systems and

   general ledger

Ensure that the preparer of the bank reconciliation

does not have check signing authority, cash
5.                      handling responsibilities or record-keeping
   responsibilities.

Identify and select the Q1 bank accounts that were

opened/closed and verify that a Bank Account
Request form is present with the signatures of the
VP of Treasury. For new accounts, ensure a
signature card is present with the appropriate
6.                      signatures. For closed accounts, ensure the GL
   account was closed once the balance was zero.
C. Bank Compensation

For each of the banks utilized by the company,

have Treasury list the basis (fee contracts) upon
which it pays the bank monthly or quarterly fees:
1.         What are the agreed-upon fees by bank?
a. Analysis statement
b. Bank statement
c. Separate fee statement

Review the Bank of America fee contract and the

most recent month’s (September 2006) service
charge statement, and trace the agreed upon fees to
the bank service charge statement to determine if
2.         they are being properly charged.

Verify with accounting what is in the accounts

balances.

D. Concentration Banking
Perform walkthrough of daily cash position
1 process.
 Obtain 2 days from 1st quarter 2007 to verify
2 completeness of supporting documentation.

Funds should be efficiently transferred from store

accounts to the concentration account using an
ACH. Which of the following methods does the
division use to transfer funds from the branch banks
3 to the concentration account:

Depository Transfer Check - the name of the

concentration account is imprinted or stamped in
the “pay to the order of” field of all branch bank
checks. The check only has to be dated, the amount
a. filled in and signed.

Electronic ACH – bank collects branch balance

information and transfers amounts per the
division’s schedule in the concentration account,
Electronic ACH is similar to a wire transfer, but
b. considerably cheaper.

c. Wire Transfer.

4. Ascertain that proper controls exist over the

wire transfer process/release (initiate, authorize,
record & release). Also verify that only authorized
personnel have access to the Treasury system
workstation and / or the Bank account / wire
transfer system.

5. Review procedures in place for wire transfers,

and verify that no one person has the ability to
initiate, authorize record , and release a wire
transfer.
Also, verify that only authorized personnel
have access to the Bank account / wire transfer
system.

6. Substantively test wires from 1st quarter

FY2007 and document findings
7. Ascertain that procedures exist to ensure
concentration limits are adhered to.
 Review the controls in place in identifying and
limiting returned ACH’s. Review the frequency of
returned ACH’s from the past 6 months.Ascertain
that Treasury is sweeping the ACHs that were
8.          returned during the month at the end of each month.

9. Review procedures in place to ensure adequate

managerial review of department activities. (e.g.
Quarterly exception reporting, monthly position
reports) and programs. Ensure that reporting tools
are prepared, reviewed and approved and the
appropriate level of management receives.
E. Forecasting & Planning
1. How does Treasury predict their position?
Shouldn’t be just on averages.
Review Treasury’s method of forecasting cash flow
from sales, disbursements, and float, document in a
2 narrative.

a. Determine the logic used for forecasting models.

Review the information used and accuracy of
b. forecasts.
c. Obtain cash forecasts and cash schedules.
F. Investments

Determine if there is a Corporate Investment Policy

outlining the type of investments and the degree of
risk that is considered acceptable by the Executive
1.                      Committee. If so, obtain a copy.

Perform a walkthrough of the Investment process

2.                      and identify all internal controls/weaknesses.
Review the most recent investments that have been
3.       made.

a. What is the average return on investment.

b.        Length of time money is invested.
c.        Ensure that investment decisions are made
solely by the Corporate Treasury department.
 d.                       Ensure that documentation is maintained
by the Corporate Treasury department.
Ascertain that an adequate supervisory review
4.       process has been
established and implemented to ensure that
investments are executed in
accordance with established rules, standards,
policies, and procedures.
G. Borrowing

Determine the methods for borrowing, document in

a narrative. Comment if any best practices are not
1.                      being currently used by the Treasury department.

Review the inter-company loan agreement to

business units covering for fiscal 07. Ensure that
the loans were requested by the unit’s top financial
officer and approved by the Executive Vice
2.                      President and Chief Financial Officer.
Review the last 5 short-term borrowing transactions
3.       and perform the following tests:
a.       Properly requested
b.       Properly approved
c.       Processed by Treasury

d.       Interest rates competitive (see point #4 below)

e.       Agree repayment to bank statement, where
appropriate
f.                       Determine if the borrowing fees are
reasonable.
H. Segregation of Duties
1. Ensure segregation of duties is in place
regarding the
following:
a. Approving investment and borrowing.
b. Recording investments and borrowing
c. Reconciling or confirming investments and
borrowing
to third party statements.
d. Review and analyze.
Authorize payments with respect to investments
a.       and borrowing
b.                      Access to assets/systems.
I. Hedging
Ensure compliance with FX Exposure Management
1.                      Policy

Ensure that any business unit wishing to transact

business in a currency other than the unit’s
functional currency notifies Corporate Treasury
2.                      prior to the execution of any contract.
Review hedging transactions for Q1 of fiscal ‘07
3.       and ensure
a.       The business unit top financial officers
consistently
                                                               i.      Identify
transaction,
including inter-company, which involve foreign
exchange exposure.

                                                             ii.      Report

to Corporate
Treasury on a timely basis all business unit
transactions involving foreign exchange exposure.

b.       Corporate Treasury executes and manages all

hedging transactions, if deemed appropriate, in
respect of exposures identified by the business unit.

c.       Transaction gains/ (losses) are reported as a

separate line item in the business unit’s income
statement and not as a material or price variance.

d.                      Review the amount of hedging

transaction and understand what is being hedged
and purpose of hedging to ensure that transactions
are business related.
Inquire of the existence of centralized Foreign
Exchange Operations. Note that a centralized FX
4.      hedging function provides:
a.       Overall FX advisory and transaction
processing
b.       Increased hedging efficiency and improved
oversight
c.       Optimal use of on-line trading platforms
d.       Trade confirmation and settlement
e.       Reduce likelihood of loss due to speculative or
unchecked hedges
f.                       limit relationships, leverage volume
 Ascertain that an adequate supervisory review
process has been established and implemented to
ensure that foreign exchange hedges are executed in
accordance with established rules, standards,
policies, and procedures. Obtain a copy of the
5.                      policy.
 Workpaper Performe Date Date
Risk if Objective Not Met Control Technique Reference d By Expected Completed
Budget Actual Document Reviewed
Hours Hours Reference Source By Remarks/Comments
Audit Program Area

AUDIT PROCEDURES Ref.

Done Time Date Date Checked
By Spent Expected Finished Remarks By:
 Audit Program Area

Audit Procedure
Global Ref
No,
Control Objective Risks Control
Activity
Number
 Control KeyControl? Frequency Owner Exceptions Type Document Mapping to
Description Reference Standards
AREA
DATE COMPLETED:
COMPLETED BY:
Question Yes No Comment
Finding Ref # Control Testing Finding
Management Response & Treatment