POL00327734 - Post Office - Audit Process Manual - audit of accounts

Evidence on official site

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AUDIT PROCESS MANUAL

2. AUDIT OF ACCOUNTS

INDEX
SECTION I CONTENT PAGE
1 Preparation activities 2
2 Travelling 2
3 Admittance 2
4 Asset verification 3
5 Asset verification process 3
6 Special notes for open plan or combination store formats 4
7 Constructing the P32 5
8 Irregularities and discrepancies 16
9 Closing meeting 16
10 Post audit activity 17
11 Whatif.... 17

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2. AUDIT OF ACCOUNTS

The following sections detail the audit process to be followed at Agency, Multiple
and Franchise outlets. the process for BO audits is covered in a separate section.

An audit leader will be allocated by the Network Auditor Manager.
Audit Leader responsibilities:
1. Preparation activities (these activities are detailed on the following pages)

1.1 Open an electronic P32 for the outlet - there is a P32 template and once
opened it should be saved as the office code and date of audit

1.2 Obtain the PAF for the outlet. This must be updated following each audit.
1.3 Examine the Network Audit Information File on Lotus notes

1.4 Complete the planning sheet within the P32

1.5 Select which Compliance tests to complete (see chapter 3)

1.6 Communicate meeting arrangements if more than one auditor attending. It is
also important that all auditors attending are aware of their role at the audit.

2. Travelling

2.1 In every case the most cost effective and time efficient route should be
chosen to travel to an outlet.

2.2 Pool cars should be utilised whenever possible.

2.3 Avoid meeting other auditors directly outside an office as this could
compromise the surprise element of a visit.

3. Admittance

3.1 For audits commencing after 08.00 - Auditors are issued with an identity card
which should be validated by the auditee who should contact the Network
Business Support Centre.

For audits commencing prior to 08.00 - The auditee should be presented
with a letter, on headed note paper, which contains the following
information :- Office name

Agent/BM name

FAD code

Attending auditors names

Attending auditors pass card numbers

An instruction to inspect all pass cards
The Operations Manager's phone number
Name of the Network Audit and Inspection Manager

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If the auditee is confident that the letter provides sufficient evidence of the
auditors’ authenticity and when all pass cards have been thoroughly inspected,
the auditors should be admitted.

If the auditee requires further verification the Operations Manager should be
contacted

3.2 Communicate the audit process and introduce attending auditors to the
auditee. It is important the auditee is aware of our purpose for visiting i.e. to
perform an asset verification and compliance audit - but they should not be told
specifically why they have been selected for audit.

3.3 Introduce all auditors attending

3.4 Outline what assistance is required i.e. cash accounts, supporting documents
etc.

Audit attendance at an office can be quite disruptive for the auditee and so
every effort should be made to minimise interruptions to the normal routine.

4. Asset Verification

The objective of an asset verification is to determine the value of cash, stock and
vouchers on hand.

It is a mandatory requirement for agents to complete and sign the final cash
account at close of business on Wednesday unless alternative arrangements
have been made in advance.

If the audit takes place on a Thursday and the previous night's balance has not
been fully completed, the audit should be based on the trial balance figure
ensuring cash and stock have been declared. The final cash account must then
be completed and signed and the office rolled over into the next cash account
period.

Checks of cash, stock and vouchers on hand must be undertaken in the presence
of the stock holder. The importance of the stock holder witnessing the asset
verification must be stressed to the auditee. Both auditor and stock holder should
acknowledge the accuracy of the figures following the check.

5. Asset verification process

5.1 Establish where Post Office cash and stock is held. Ascertain if the office
operates shared or individual stock units.

5.2 Obtain the previous week’s final cash account. The figures should not be
altered by the auditor in any way or made illegible as these may need to be
produced at a later date, possibly as evidence in a court of law.

5.3 Obtain an ONCH printout for the night prior to the audit, the current weeks
daily printouts and all vouchers on hand. Obtain and record cheques and

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vouchers on hand. Access to all cash, stock, vouchers and cash accounts
should be restricted until they are checked.

5.4 Obtain the following printouts from the Horizon system:

a) office snapshot, if shared stock unit is in operation

b) stock unit snapshot for each stock if individual stock balancing is in
operation

c) a suspense account summary

5.5 Count and record all the cash on hand (including Lottery takings) and
verify/compare cash figure to that declared. Count cash and stock in ATMs,
SVMs, CTDs etc.

5.6 Count, record and reconcile the stock on hand to the snapshot printout
(standard network audit cash and stock input forms must be used).

5.7 Reconcile all items despatched since the last declared cash account and all
vouchers on hand to the snapshot printout. List vouchers on hand (standard
network audit voucher sheet must be used).

5.8 Obtain Lottery figures and reconcile unopened scratchcards.

5.9 Count and record foreign currency holdings (if on demand Bureau get
command 3 print).

5.10 Verify figures in tables 2/2a/3 (Unclaimed Payments/Authorised cash
shortages/ Uncharged Receipts).

5.11 Construct a P32 (see below)

5.12 Achieve balance figure and inform agent of the result.

5.13 Request agent adjusts discrepancy or seek proposals for recovery
6. Special Notes for Open Plan or Combination Store Formats:

6.1 Open plan offices are those without a physical screen barrier between the
customer and the person serving. “Combination Store” is the title given to
retail outlets which combine other retail business with Post Office transactions
using the same point of sale. The same person will deal with private and Post
Office transactions, but funds and accounts will be separated.

The asset verification process above applies to open plan and combination
offices, but special care must be taken because of the different security
arrangements.

Various types of safe will be found in operation, each with the purpose of
protecting bulk cash from counter snatches. Safes will therefore dispense small
sums or the exact amount required for the transaction.

To minimise security risk to staff and funds, the following principle applies:

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“Under no circumstances should bulk cash be counted in positions which
are exposed to the public”.

6.2 Consideration should be given to starting the audit while the shop/office is
closed to avoid the problem.

6.3 Many of these sophisticated safes are fitted with “fast access” devices to
allow for rapid replenishment. This facility MUST NOT BE USED if the
public are in the shop or office. It may be that cash counting will require
considerably more time and consideration will have to be given at the
planning stage to the staff resources required.

7. Constructing the P32

Documents/reports:-

7.1 The planning sheet should be completed prior to the audit. See example

below. There are notes in bold and italics and arrows to guide on completion.

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NETWORK AUDIT PLANNING SHEET
OFFICE DATE OF AUDIT
FAD CODE
TYPE OF AUDIT Dropdownmenu Drop down menu 2 «—— an audit
typeto
be selected
AUDIT LEADER
? All from fields to be input to
AUDITORS
INSERT X IF PLANNING ACTIVITIES COULD NOT BE COMPLETED [_] AND
DETAIL THE REASON BELOW.
PLANNING ACTIVITY COMMENTS DATE
1. Previous audit papers/report I Noted on next pages
examined and High Risk Date Shee
control gaps noted complete
to be inpu

2. Permanent Audit File (PAF)
examined and information
relevant to audit noted

Access time

3. Audit Preparation file

examined ( A
Information from ZS
STAM

Information from sotus/
notes database

Uk

Wk number of date
authorised

I

Number of error notices issued
Number of QPA errors

Number of balance discrepancies

Value of balance discrepancies
Value of authorised amount
NBSC call ref. No

Week number
I Week number,

4, Compliance tests determined

Selection of tests planned

5. Planning cascaded to other
auditors attending.

Cash and stock task allocated

Travel arrangements agreed
Meeting time

Meeting place

CAT SELECTION

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Below are abbreviations to be used to detail reasons for examining or not
examining each Compliance Test
e NPG - No previous control gaps (High/Medium)
e PNT - Product not transacted
e NC - First audit of outlet since new CAT introduced
e PF - Preparation File (Lotus Notes)
e CORE - Core test
e AT - Audit Type
« COM - CAT of the month one of
these
« PCG - Previous control gaps abbreviations
must be
input here
Compliance Tests Summary of High Reasons for [Fest performed
(CATs) Risk Control gaps X I examining o on audit by
at last full audit not ee I
examining

Procedural Security

If there were no Every row in

high risk control this column

gaps at last audit should

or this is the first contain an

audit - leave this abbreviation -

column blank whether to

state why a

test is to be
completed or
to state why
not.

Horizon System
Controls

Cash Account

Stock Management

Cash Management

Royal Mail

Franking Machines

SVM

A&L Girobank

Personal Banking

National Savings

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Nat. Lottery On Line

Nat. Lottery Instants

Littlewoods S/C’s

Bureau De Change

Foreign Exchange

Moneygram

Travel Insurance

Benefits Agency

Motor Vehicle
Licences

Rod Fishing Licences

UK Passport Agency

Utility Schemes

Local Transport
Scheme

PREPARED BY REVIEWED BY

7.2 The serial number sheet is used to record serial numbers of Environmental
Agency Rod Fishing Licences and Lottery cheques. Once these have been
entered the numbers can be verified post audit by the PA support in the
process section, Chesterfield.

POST AUDIT VERIFICATION (LBU)

OFFICE CODE DATE

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DATE ROD RECEIVED
RECEIVED I LICENCES TO
FROM
COARSE
SALMON
DATE LOTTERY CHEQUES ON HAND
RECEIVED
LIVE
BULK
Recorded by Checked at LBU oo... ieeeceeeeteeeeeeeees

7.3 The Audit Report must be completed following an audit where compliance
tests were completed. See notes in bold and italics below.

Once an audit has been completed it is necessary to write a clear, concise
and balanced report of the findings.

The template within the P32 lists all the possible control gaps that could be
identified for each compliance test. When completing the report all irrelevant
control gaps should be deleted. It is important not to add any gaps that are
not listed as these are agreed with the Internal Account managers and should
not be altered. If a control gap, not listed is discovered it should be noted in
the comments section.

The comments section should be used to explain any control gaps that
require action by the auditee. This section should also be used to balance the
report and ensure good working practices are documented.

It is imperative that the report reflects the points discussed at the closing
meeting.

IN CONFIDENCE

To: copy:

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From: Date: 03 January 2024
Network Audit & Inspection Team

These details are automatically linked from
the account sheet in the P3.

Audit of \Office code

An audit of the above office was undertaken Om by . This audit is a review of the
product/process controls in place at the outlet and not a comment on the
performance of individuals.

The following page contains a brief summary of the areas that could be routinely
tested at audit and the tests carried out are selected on a basis of risk
assessment from outlet performance data. The products/processes with a cross
indicate items that have been tested by the auditors on this occasion and the
findings revealed at audit.

Appendix A contains a more comprehensive report detailing our findings and
recommendations for your information and attention. Any control gaps in bold
were noted on a previous audit and had not been actioned at the time of our most
recent visit.

At the audit, you were given a questionnaire to provide feedback on the audit

process. If there is anything else you wish to bring to our attention please feel
free to write your comments on the reverse of this report or contact , Operations

Manager on telephone number+—____ neta
Ensure co. t details are selected

from drop down menu

Please retain one of these reports for your information and return the other one,
signing it to confirm that you understand all the points made.

«—— /nsert a personalised ‘thank you’ message here

Network Auditor signature .........ccceceeceeeeeereereeeneenee Date

Subpostmaster/ Outlet Manager signature .................062 Date siinnie estes peeiicde

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AUDIT OF Insert an X into one of these
for areas tested \
Products/Processes Controls Control Control
in Place Gap Gap
Low Risk I High Risk

Procedural Security

Horizon System Controls

Cash Account

Stock Management

Cash Management

Royal Mail

Franking Machines

Stamp Vending Machines

Alliance & Leicester Girobank

Personal Banking

National Savings

National Lottery On Line

National Lottery Instants

Littlewoods Scratchcards

Bureau De Change

Foreign Exchange Service

Moneygram

Travel Insurance

Benefits Agency

Motor Vehicle Licences

Rod Fishing Licences

UK Passport Agency

Utility Schemes

Local Transport Scheme

Oona

Oooo

eee eee

Network auditors can only comment on the areas examined during their visit. It
should not be assumed that untested processes have satisfactory controls in

place.

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Audit of

Asset Verification Amount automatically transfers

from account a
A full check of cash, stock and vouchers revealed a surplus/shortage of £ which is
broken down as follows:

Net surplus declared week no.

Net shortage declared week no.

Rem surplus/shortage Delete any headings that do not apply and
Difference at audit... Input amounts to relevant lines

Audit Surplus/Shortage ,—_ This amount automatically transfers from account
sheet

An authorised/unauthorised amount of £ has been held in the Suspense Account
between weeks () and ().<—— Where brackets appear, insert details and
then delete brackets

An authorised/unauthorised amount of £ has been held as a refer to drawer cheque in
the Suspense Account between weeks () and ().

The shortage was made good at the time of the audit. “————— _ Delete text
that doesn’t
appl;

You have proposed to () in order to make good the shortage.

As you are unable to make good the shortage it is recommended that the RNM/AM

contacts you as soon as possible to agree a course of action.

The details of this report have been given to your RNM/AM who will contact you about

arrangements to make good the shortage.

Comments: Use the comments section to further explain the above or to
detail other asset verification findings

Security Procedures
Your security procedures were examined in line with the Counter Attack Reference
Manual and our findings were as follows:-/all controls were found to be in place.

one oMhese sintamerteGast be deleted

Delete all irrelevant control gaps. Do not add any gaps to this section, any
additional gaps identified must be noted in the comments section below. These
control gaps must not be added to under any circumstances.

Control Gaps - High Risk

e incorrect admittance procedures for visitors

e outlet opening procedures and/or external check of premises was unsatisfactory
the fitted time lock is not used

e the safe keys were left in the safe
e there was excess working cash held on counter
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security equipment was not in working order or it’s use understood

the safe door was left open

cash and stock was not adequately safeguarded

the counter access door was left open and/or the keys were left in the counter access
door

the parcel hatch was left open when not in use

remittances were incorrectly accepted or stored

keys were not separated

the door and or safe keys were incorrectly secured

the incorrect closing procedures were followed at lunch or evening time

Lottery monies were not adequately transferred from the retail side

Lottery monies were not adequately secured outside of post office business hours
the alarms are not operational or adequately tested

a copy of the ‘Counter Attack’ book was not on hand

the agent and/or staff were unaware of the hostage policy

the lottery cash and cheques were not adequately secured

procedures and security at open plan offices is inadequate

Control Gaps - Low Risk

e the safe keys are not rotated at six monthly intervals

there was no documentation of alarm tests

there was no anti-intruder alarm installed

the hostage reporting procedure not known by the office staff

there was no money laundering pack available and/or staff were unaware of the
regulations or helpline details

e auditee was unaware of correct procedure for reporting alarm faults

Comments: ,____ Use this section to balance the report and expand on the
control gaps identified if further explanation is required.

Once completed two copies of the report should be completed, one to be sent to
the Retail Line and one to the auditee for signature and comments. The auditee
will return the copy and if required, comments should be actioned and the report
then filed with the audit papers within the PAF.

For Multiple and Franchise outlets a copy of the report should also be sent to the
relevant company representative, detailed on the Lotus Notes Information File.

To: PA Support
From:
Date: 03 January 2024

7.4 Error Notice Information

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Auditors should access STAM (System Transaction Accuracy Measure) at the planning
stage of the audit. Instructions to access STAM are held by the planning section.

The form below should be completed if there are outstanding error notices on hand that
are brought to account during the audit.

ERROR NOTICES - OFFICE
FAD CODE -

The audit at the above office revealed the following information on error notices

Reference Error Type Amount Date Issued _I BTA Date

Additional Information:

7.5 Additional report template

This is an additional template or use when information, not detailed in the report, is
required by or useful to the Security & Investigations Team or the Retail Line. The report
should be detached, saved on the C drive and then emailed to the recipient. This should
not be sent to the auditee.

To: copy:

From:
Network Audit & Inspections Team

Date: 03 January 2024

AUDIT OF

P32 Account sheets

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Within the P32 there are several account sheets that require completion. Many of the
sheets contain links to other sheets. The detailed completion of the P32 will be covered
as part of the induction process for all new auditors. In brief, the information to be input
on the sheets are as follows:

Account - weekly receipts, payments, cash and stock on hand (there is also a column
for previous weeks stock as this allows for anomalies to be identifies more easily).

Suspense - amounts in the unclaimed payments and uncharged receipts tables from
the cash account.

Daily - daily receipts and payments.
Rems - amounts of cash and stock sent out and received.

Cash/Cheques - cash on hand at the audit and declared cash on hand by auditee.
Details of cheques on hand should also be input.

Postage, other stock & philatelic - amounts from the stock input sheets.

Reconciliation - environmental agency fishing licence serial numbers and traveller
cheques received/returned etc.

MVL reconciliation - details of MVL’s on hand, received and returned at offices
transacting MVL’s. Once figures are input this will automatically show whether the outlet
had balanced.

Equipment - all equipment used by the auditors to complete the audit.

SMCAT - this should only be completed if the stock management CAT is being carried
out

R&B - documents to be completed at Robbery and Burglary audits

Measures - This sheet should be completed after every audit and the latest guidelines
should be followed

Database - this sheet should not be input to. All the information transfers from other
sheets

Once the P32 is completed and saved it should be emailed to the planning section at
the earliest opportunity.

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8. Irregularities and Discrepancies

All outlets should make good losses and withdraw surpluses as they arise. These
discrepancies should not be carried forward to future accounts unless the reason for the
discrepancy is known and a full explanation can be provided.

NBSC authorise all losses. The authorisation will be supported by a call reference
number.

The planning section receive a weekly report of authorisations and these are posted
onto the lotus notes information file on a sheet called Authorised losses. This should be
checked at the preparation stage of the audit and any current authorised amounts
noted.

If on site amounts claimed are unauthorised auditors will need to ring NBSC from the
office to confirm authorisation. Amounts not authorised by NBSC should be treated as
unauthorised losses and advised to the Retail Line at the time of the audit

Auditors should be aware of any nominee Multiple and Franchise outlets which have
been granted special dispensation to make good losses or withdraw surpluses over a
period of time and should follow the agreed practice. Details of these outlets are on the
Lotus Notes Information File.

While it is not the primary function of an auditor to detect fraud, it is not uncommon for
auditors to find evidence that leads to suspicions of fraud, or for an auditee to make an

admission of fraud to the auditor. In these circumstances there is a standard process to
follow shown at Appendix A.

9. Closing Meeting

Once the asset verification and compliance tests have been complete, the audit findings
will need to be discussed with the auditee.

The following guidelines should be followed:

9.1 The meeting should be conducted in private whenever possible as some of the
points for discussion may be sensitive

9.2 The audit leader should be familiar with all the findings of each test carried out.

9.3 When talking through the findings it is important to discuss them in a balanced way
and be able to qualify exactly what is meant. The reason for any actions should be
clear. The consequences of not complying should be communicated; however
“because it is in the rules” is not an acceptable explanation. It is useful to point out
where the correct procedure is documented and the importance of adherence to it.

9.4 All the auditees’ comments or requests should be documented

9.5 Allow the auditee time for questions

9.6 Following the closing meeting a customer satisfaction feedback from should be left
with the auditee at the outlet. This will then be returned and the results collated.

10. Post Audit Activity

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10.1 Following the audit, each network auditor should carry out the following activities:

e Ensure all embedded documents in the P32 are completed

e Fully complete the report and print out a copy to send to the auditee. The report
should be despatched within 10 days of the audit.

e Fully complete the measures sheet

e Email P32 to the relevant support duty in Chesterfield

e Save a copy of the report as a separate word document, password protect it
and Email it to the RNM/RLM/AM

10.2 There are two post audit activity duties in Chesterfield. They carry out the
following activities:

Lottery checks - using the embedded document in the P32

Serial number checks - using the embedded document in the P32

Error notice reports to the relevant team

DVLA information checks

SAPADS checks of remittances

BT figures checked against mainframe

Enigma figures checked against mainframe

Stock remittance figures are emailed from each audit to the relevant team for
verification

11. What if

The following is a guide on how to deal with different situations that may occur during
audit. If you are suspicious of anything you find on audit you should contact the
Operations Manager.

WHAT IF.........0008
1. the auditee presents some cash after the start of the audit?

The auditor should always confirm with the subpostmaster that all cash and stock
has been produced at the outset of the audit. If cash is presented after this, it
must be excluded from the audit figure (an audit reflects a verification of assets
on hand at the time of the audit commencing.) If the circumstances are
suspicious, e.g. audit shortage = cash presented, keep a written record of all
discussions and the precise words of the admission and ask the subpostmaster
to sign this record. (If refused, endorse the statement “refused to sign”.) Contact
the Operations Manager.

2. a personal cheque is on hand?

Contact the Operations Manager immediately. Keep a written record of all
discussions and the precise words of the admission . Ask the auditee to sign this
record (If refused, endorse the statement “refused to sign”). Unless the cheque
relates to a legitimate transaction and there is evidence of the transaction,
the subpostmaster is likely to be suspended. The cheque should be

impounded without prejudice & excluded from the audit figures.

3. the cash account for last week has not been completed?

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The office should be kept closed until the subpostmaster completes the account.
The auditor should verify all figures of the account.

4. the cash account for last week was inaccurate?

The inaccuracy should be pointed out to the subpostmaster. Amounts > £20
should be held in U/P or U/R as “awaiting error notice” unless it is a Table 5 error
(this will then adjust the previously declared shortage or surplus). If < £20, hold in
U/P or U/R for the P32 for audit purposes only and detail error in audit report.
DO NOT CHANGE THE BALANCE B/F.

5. the subpostmaster disputes outstanding error notices?

Seek reasons from the auditee and, if still disputed, complete proforma to the
error notice duty.

6. authorised amounts are held in U/P or U/R?

Include amounts that have an NBSC reference number in the audit U/P or U/R
but record this in the audit report e.g. “There was an surplus revealed at audit of
£12.75. This excluded a loss of £ 525.98 being held in the account with correct
authority until week ending xx/xx/xx.”

7. unauthorised amounts are held in U/R or U/P?

Exclude amounts from the audit figures. Advise the Operations Manager. The
report should indicate that the amount had been held in the account without the
necessary authority.

8. the audit balance is an unexpected large sum short?

An explanation should be sought from the subpostmaster. If no explanation is
available, any amount in excess of £500 should be discussed with the Operations
Manager. Before contacting the Operations Manager, look at the level of
declared losses in the cash account. Depending on a number of factors such as
the day of the week, the amount of loss compared to the size of office and
accounting record as well as any other concerns, the Operations Manager may
consider a second audit and/or contact the Retail Line.

9. the subpostmaster admits a fraudulent activity?

The subpostmaster should be immediately advised that, in view of the admission,
the office will be kept closed until the RNM/RLM/Area Manager makes a decision
on action to be taken. Keep a written record of all discussions and the precise
words of the admission and ask the auditee to sign this record (If refused,
endorse the statement refused to sign”). Contact the Operations Manager.

DO NOT ENTER INTO A DEBATE WITH THE SUBPOSTMASTER ABOUT
WHAT WAS WRONG WITH THE ACTIVITY. IT IS NOT OUR POSITION TO
MAKE A JUDGEMENT, ONLY TO REPORT ON THE FACTS.

10. suspicions are aroused while checking redeemed stamps, vouchers or
undercopies

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Continue the audit as normal. Contact the Operations Manager who will advise
how to proceed.

IN THE MEANTIME, DO NOT ALERT SUBPOSTMASTER OF ANY
SUSPICIONS

11. I amasked to suspend the auditee?

Tell the subpostmaster that “The RNM/RLM /Area Manager has decided that
he/she will be temporarily suspended while further investigations take place. The
RNM RLM / Area Manager will contact them in due course and until then, the
office will remain closed (unless an interim is found)”. DO NOT APOLOGISE
NOR ENTER INTO DISCUSSION AS TO WHY A SUSPENSION HAS BEEN
AFFECTED - REFER THEM TO THE RNM RLM/ Area Manager.

12. The Lottery takings are not transferred over to the Post Office side but are
banked in a personal account?

Contact the Operations Manager who will then contact the Retail Line. Explain to
the auditee that this is not an acceptable procedure.

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APPENDIX A - DEALING WITH DISCREPANCIES REVEALED AT AUDIT
Unauthorised discrepancies <£500 Unauthorised discrepancy >£500 Authorised discrepancy
Credit Sales
irregular Personal Cheques
Contact NBSC - applying normal process - Contact the Operations Manager Detail findings in the audit
discrepancy remains unauthorised f— (Ops Manager) report.

Are there any irregular or suspicious
circumstances

Ops Manager reviews and
evaluates the evidence

an the discrepancy be
made good

Ops Manager contacts the Retail
Line and/or relevant security section
as appropriate Review to include:

Comments/statements made by
staff/auditee
Type of audit

Detail findings in the audit report Auditors to detail findings in the audit Size of outlet
emailed to the Retail Line report and forward an additional copy of Previous audit history

report to the relevant security section Time of audit

Known errors

Can the loss be made good

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