Internal Audit of Treasury Operations

Internal Audit of Treasury Operations

An audit of a company's treasury management/operations typically includes the following key areas:

1. Treasury Policies and Procedures:

Evaluate the adequacy and relevance of the company's treasury policies and procedures.

2. Segregation of Duties:

Assess whether there is adequate segregation of duties in critical treasury areas, including:

2. • • • Borrowings

       • Investments

       • Foreign exchange transactions

       • Banking operations

3. Borrowing Transactions:

For a sample of debt transactions:

3. • • Verify proper approvals were obtained.

     • Confirm the accuracy of loan received, interest payments, and principal repayments per the debt agreement.

     • Ensure accurate and timely accounting of the transactions.

4. Investments:

For a sample of investments:

4. • • Confirm adherence to the company’s investment policy and verify proper approvals.

     • Match investment details (amount, tenure, and returns) in the ledger with supporting documentation, such as contracts and statements.

5. Cash Flow Forecasting:

   • • Review the accuracy and timeliness of cash flow forecasts by comparing actual figures against projections.

     • Assess the process for investing surplus funds to minimize idle cash while maintaining sufficient liquidity.

   • Foreign Exchange Transactions:

For a sample of foreign exchange transactions:

6. • • Verify compliance with delegated authorizations and company policies.

     • Ensure proper recording in the ledger.

     • Compare foreign exchange gain/loss entries in the general ledger with supporting documentation, such as contracts and bank statements.

7. Hedging Transactions:

For a sample of hedging transactions:

7. • • Verify adherence to the company’s hedging policy and proper approval.

     • Confirm timely settlement and accurate reconciliation of the transactions.

8. Bank Reconciliations:

Confirm that bank reconciliation statements are prepared promptly, approved appropriately, and that reconciling items are addressed in a timely manner.

9. Bank Mandates:

Ensure that the bank mandate is duly approved and that its details (e.g., approval authorities and transaction limits) match the bank’s records.

10. Bank Charges and Fees:

For a sample, verify that bank charges and fees align with agreements and are accurately recorded.

11. Disbursements:

For a sample of disbursements, including electronic fund transfers and wire transfers:

11. • • Verify that they are properly approved.

      • Ensure compliance with treasury policies and internal guidelines.

      • Confirm adequate supporting documentation is in place.

12. Cash Receipts:

For a sample, ensure that cash receipts are:

12. • • Accurately recorded.

      • Properly authorized.

      • Compliant with internal policies.

13. Insurance Coverage:

    • • Verify the existence of valid insurance policies covering key risks.

      • Assess whether coverage amounts are adequate to mitigate identified risks.

      • Check the timeliness of policy renewals and ensure no lapses in coverage.

14. Periodic Reporting:

• Ensure that periodic reports provide accurate, relevant, and timely information to support management decision-making.

• Verify the inclusion and tracking of key performance indicators (KPIs).