Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 161

Management and internal audit are discussing possible solutions to address the organization's insufficient petty cash. Which action would most effectively and efficiently mitigate the risk?

Answer options

• A. Implement policies to submit a daily petty cash reconciliation to the branch manager's superior and to replenish petty cash when it is 50% depleted.
• B. Analyze the expenses that are paid using petty cash and increase the limit of the petty cash float to satisfy the expenses.
• C. Appoint a new petty cash custodian for processing cash disbursements.
• D. Require recording all disbursements in a petty cash log.

Correct answer: B

Explanation

Option B is the correct choice because increasing the petty cash float directly addresses the issue of insufficient funds for necessary expenses. The other options, while potentially helpful in managing petty cash, do not resolve the underlying problem of inadequate funds to meet the organization's needs.