Question

Problem 6-1A Analyzing internal control LO C1 O C1 Following are five separate cases involving internal control issues. Required: 1. For each case, identify the principle(s) of internal control that is violated. Chi Han receives all incoming customer cash receipts for her employer and posts the customer payments to their respective accounts. At Tico Company, Julia and Trevor alternate lunch hours. Julia is the petty cash custodian, but if someone needs petty cash when she is at lunch, Trevor fills in as custodian. Nori Nozumi posts all patient charges and payments at the Hopeville Medical Clinic. Each night Nori backs up the computerized accounting system but does not password lock her computer Ben Shales prides himself on hiring quality workers who require little supervision. As office manager, Ben gives his employees full discretion over their tasks and for years has seen no reason to perform independent reviews of their work. Carta Farah's manager has told her to reduce costs. Carla decides to raise the deductible on the plant's property insurance from $5,000 to $10,000. This cuts the property insurance premium in half. In en related move, she decides that bonding the plant's employees is a waste of money because the company has not experienced any losses due to employee theft. Carla saves the entire amount of the bonding Insurance premium by dropping the bonding Insurance

Answer 1

0 Answer! (a) o chi Man Recetres all Incoming Customer Goh Cash Receipts for her employes and posts the payments to their Respective Accounts Here the Principle of Asset Records & Costody has been voilated as chi han is the same Person Collecting the Cash & Recording the Cose (6) 2 Julia is the petty cash Custodian, but if someone Needs Petty Cash when she is at which, Trevor fills in as wstodian, Here Company is avstating Violating the Principle of Technological Internal Control which Mearis Using technological Support or tecnologiy to operate such Function's which requiry no breaks or extra pays. all Payments (c) @ Nori Nozumi is in charge of Posting to Computerized Accounting System but has no Passward look to Her Computes, Here the Principle of access Contal is Violated by the company employee as any Unauthorised Uses can onse access the Records trant which can be a failure for the Company and Can Result into a misuse of Information

(d) 9 Ben ging his employees Full discreation ones their tasks and for years has toon seen no reas Reason to Perform Independent relves and of their work, Here Ben has voito Violated the Principle of Independend Review of Internal Control Activies and system which through which Ben Can Real Report on the work being done throughout the Internal Control Process. () and Carla Farah's Manages has told her to reduce Costs, and she decided to deduct plant's Property Insurance from & 5000 to $10000 and also has drabe dropped the plant's employees bording Insurance Premium, Here Carla Farah Violated the Principle of Insurance & Bonding which can assure the organisation of o Reimbursement for the value of Assets if the assets in stolen or otherwise Missappropriated.