Question

Current Attempt in Progress The following control procedures are used in Bunny's Boutique Shoppe for cash disbursements. (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. Procedure Weakness Principle Violated 1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. 2. The store manager personally approves all payments before she signs and issues checks. Use of cash instead of checks; no prenumbered invoices Filing does not prevent a bill from being paid more than once The bank reconciliation is not independently prepared The approval and payment of bills is done by the same individua. Checks are not stored in a secure area Unauthorized employees making purchases 3(i). 3 (ii). The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register. After payment, bills are "filed" in a paid invoice folder. The company accountant who records cash transactions also prepares the bank reconciliation and reports any discrepancies to the owner

Answer 1

control procedures

S.no	weakness	principal violated	I
1	checks are not stored in a secured place	physical controls
2	Approval of payments of bills is done by some individuals	Establishment of responsibility
3(I)	unauthorized employees makes purchases	human resource controls
3(ii)	use of cash instead of checks, no prenumbered invoices	documentation procedures
4	filing doesn't prevent a bill from being paid more than one time	independent internal control
5	bank reconciliation is not independently prepared	segregation of duties

Answer 2

		Weakness	Principle Violated
1	Each week, 100 company...	Check are not	Physical controls
2	The store manager personally...	The approval and payment...	Segregation...
3(i)	The store purchases used...	Unauthorized employees...	Establishment...
3(ii)	The purchases is documented...	Use of cash....	Documentation...
4	After payment, bills are...	Filling does not prevent	Documentation
5	The company accountant...	The bank reconciliation...	Independent...