Question

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control. 1. Latisha Tally is the company's computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latisha has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll. 2. Marker Theater has a computerized order- taking system for its tickets. The system is active all week and backed up every Friday night. 3. Sutton Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.

Answer 1

	DEFICIENCY	RECOMMENDATION	TEST OF CONTROL
1	Payroll system can only be accessed by one manager and he can alter pay rates and can add or delete employee details. There is no segregation of duties.	Access to payroll system must not be given to one person . altering or changes to master file or data should be given to different senior managers.	observe proper segregation of duties to prevent fraud or error
2	Marker theater only backup system data on every Friday.	the system should be be backed up regularly on everyday.	Review orders of particular day .
3	Sutton co: has only two employees handling inventories .one employee is responsible for purchase orders and payment,other employee receives the merchandise. This is a lack of segregation of duties and could lead to a risk of fraudulent transactions or errors,as no one checks the work done by these employees.	a senior manager should authorize the work of these two employees.	Review purchase orders and identify if correct signatory has authorized them.
4	The check software/printer is not password protected and company checks are remained unlocked. there is a risk of misappropriation of assets.	the check software/ printer should be password protected and owners desk in the office should be properly locked or the place should be properly monitored (using CCTV camera .. etc)	observe CCTV camera or ensure the office desk is properly locked.
5	The employee responsible for cash disbursements reconciles the bank account monthly. there is no segregation of duty here ,as the same is responsible for cash payment and reconciliation .	cash disbursement and reconciliation should be done by different personals. obtain proper approval for all disbursement and create permanent record for each disbursement. and the record should be properly sequenced.	observe segregation of duties. ensure the records are numerically sequenced