Question

locker rentals corp. operates locker rental services

Question of 071 points Locker Rentals Corp (LRC operates locker rent services at several locations throughout the city including the airport bus depot shopping malls, and the s ite Unlike some of the old mechanic lockers that change a fred amount per use LRC s lockers operate electronically and are able to change based on hours of use. The locker systemami a daily message to LRC s e indicating the number of hours that lockers have been used, which the orice manager ses to determine when cash should be picked up at each location LRC can receipts system is described below 1. For each statement (a ). Identify the internal control principle being applied Segregate duties Two employees cash collection desks") are responsible for collecting cash from the lockers Based on instructions from a. the office manager one des collects cash from specie locations on the west side of the city and the other collects from specific locations on the east side b. When each cash collection clerk returns with the cash a supervisor counts the cash and prepares a cash count sheet The supervisor summarizes the cash court sheets in a prenumbered daily cash summary and files the prenumbered cash count sheets by date The superviso places the cash in a locked abou t is taken to the bank for depost The supervisor not the cash collection clerks, takes the cash to the bank for deposit The supervisor prepares a duplicate deposit sip, which the bank stamps after the deposit is made to indicate the date and amount of the deposit The Supervisor sends the stamped bank deposit slip and daily cash summary to the accountant, who compares them before preparing a joumal any debiting Cash and crediting Locker Rental Revenue 2. A v eral months LRC Supervisor is nested forstwing new Identify the internal control weakness that oured this theft to occur 510.000 from the company The supervisor was not professional e d to account for the cash The cash collection clerks should have been made responsible for deposing the cash in the bank The supervisor was responsible for handling the cash preparing the cash count sheet and deposing cash in the bank The accounting system was not adequate to detect the fraud The cash collection Clerks should have been at least four in number one for each ares-cast west north out References eBook & Resources

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1. Internal control systems being applied is given below: a. Principle of establishing responsibility: According to this principle, the cash collecting clerks are responsible collecting the cash handing over the cash to the supervisor. The company followed this principle properly. While taking the cash from the clerks, the supervisor should compare the cash collections with the office managers determined sheet. b. Principle of segregation of duties: The supervisor's should be confined to collection of cash from the clerks and preparing the cash sheet and taking the signatures of the supervisor as an evidence of handing over of the cash. c. Document procedure: The supervisor is preparing both cash sheets and cash summary d. Restricts access: the supervisor is collecting the cash from clerks, he is preparing the cash sheets and he is keeping the custody of cash. e. Segregation of duties: The supervisor should not be entrusted the work of depositing the cash in the bank. The work should be segregated. f. Documentation: The supervisor is preparing the bank slip and depositing the cash in the bank. g. Independently verify: the accountant is verifying the bank slip with the cash summary sheets 2. The main defect in the process is that there is no proper segregation of work. All the work is done by supervisor only. Another defect is verification. There is not proper verification procedure in the company

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