Question

Choices are

Identify the internal control principle that was violated in each of the following separate situations. Situations Principle Violated The recordkeeper left town after the owner discovered a large sum of money had disappeared. An audit found that the recordkeeper had written and signed several checks made payable to his fiancé and recorded the checks as salaries expense а. An employee was put in charge of handling cash. That employee later stole cash from the business. The company b. incurred an uninsured loss of $184,000. There is $500 in cash missing from a cash register drawer. Three salesclerks shared the cash register drawer, so the С. Owner cannot determine who is at fault.

Establish responsibilities

Insure assets and bond key employees

Separate record keeping from custody of assets

Choices

• Apply technological controls
• Establish responsibilities
• Insure assets and bond key employees
• Maintain adequate records
• Perform regular and independent reviews
• Separate record keeping from custody of asset

Answer 1

Question 1

a) the record keeper had both responsibilty of the preparer, maker, checker and physical custody of cash which should have ideally seggregated. hence the internal control check violated is the seggregation of duties.

b)Theft of cash : The company should have insured on key employees .

c) THe owner could not establish who stole due to lack of standard responsibilities gainst each person and each job.

Question2

All the options were self explanatory hence no notes were provided.

a) Record keeping and custodian functions

b)Insure assets and bond key employees

c)Establish responsibilities

d) Maintain adequate record

e)Apply technological controls

f) an Audit is an independent examination of financial records to establish truth and fairness.Hence performing independ review is the right cintrol.