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Treasury Audit
In a treasury audit, we evaluate the management of cash flows, short-term assets, and short-term liabilities and look for trouble spots, such as weak internal control points, processing bottlenecks, inefficient delays in mobilizing internal funds, and fundamental blockages in treasury practices. The emphasis is more on identifying potential problems than in developing solutions, although in many cases the solutions are fairly straightforward. It's often the case that new eyes looking at the "same old" way of doing things can easily spot problems areas.
The results of treasury audits can be important inputs into reviews for Sarbanes-Oxley subcertification. TIS principals can work closely with treasury staff to complete these reviews and assure senior management that treasury activities are well controlled and functioning properly.
What's involved in a treasury audit?
Treasury audits can focus on several areas, depending on the client's activities. Typically, a treasury audit covers the following aspects:
- The treasury organization: This is reviewed with respect to the effectiveness of the current organization. Treasury documentation, procedures, and practices are evaluated for effectiveness, appropriateness, and security.
- Bank services: The bank services currently used are reviewed for appropriateness to stated needs, as defined by the treasury staff.
- Bank service charges: The organization's bank charges, as detailed on bank account analysis statements and other bank information, are reviewed for appropriateness for the services offered. Compensation methods and levels are evaluated and compared with standard benchmarks (where possible).
- Cash flow forecasting activities: The effectiveness of the organization's cash flow forecasting activities is measured against plan, trended over time, and for impact on investing and/or borrowing activities.
- Investment activities: Investment strategies and activities, including the organization's investment policy and guidelines, are reviewed for reasonability and effectiveness. Yields on investments are compared with appropriate standard benchmarks to measure performance.
- Borrowing activities:These activities are reviewed, focusing on aspects of current credit lines, actual vs. planned credit line usage, effectiveness of the organization's borrowing policy, and levels of compensation. Average loan price will be compared with appropriate standard rates to measure performance.
- Financial risk management activities: The steps and strategies of the organization's financial risk management activities are evaluated and compared with appropriate standard benchmarks.
- Other special activities: Other activities, such as foreign exchange management, trade credit management, receivables management, or payables management, may be included.
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