Question

The following control procedures are used in Keaton Company for over-the-counter cash receipts. (a) For each procedure, explain the weakness in internal control and identify the control principle that is violated, Procedure Weakness Principle Violated 1. Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy All over the counter receipts are registered by three clerks who share a cash register with a single cash drawer. 3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stock room until it is deposited in the bank. At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total 5. The company accountant makes the bank deposit and then records the day's receipts.

can someone help me? thank u

Answer 1

An entity implements control policies and procedures in order to reduce the risk of fraud and error which may result in misappropriation of assets or a financial reporting error.

1.Procedure-Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy

Weakness-Cashier are not bound and background check are not conducted

Principles violated-Human resource controls

2.Procedure-All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.

Weakness-Inability to establish responsibility for cash on a specific clerk

Principles violated-Establishment of responsibility

3.Procedure-To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stock room until it is deposited in the bank.

Weakness-Cash is not adequately protected from theft

Principles violated-Physical controls

4.Procedure-At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.

Weakness-Cashiers are not bonded and background checks are not conducted

Principles violated-Independent internal verification

5.Procedure-The company accountant makes the bank deposit and then records the day's receipts.

Weakness-The accountant should not handle cash

Principles violated-Segregation of duties