Question

Exercise 8-06 Listed below are five procedures followed by Gilmore Company. 1. Employees are required to take vacations. 2. Any member of the sales department can approve credit sales. 3. Paul Jaggard ships goods to customers, bills customers, and receives payment from customers. 4. Total cash receipts are compared to bank deposits daily by someone who has no other cash responsibilities. 5. Time clocks are used for recording time worked by employees. Indicate whether each procedure is an example of good internal control or of weak internal control. If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated. Procedure IC Good or Weak? Related internal control principle 1. 2. 3. < < 4. < < 5. Click if you would like to Show Work for this question: Open Show Work

Answer 1

Procedure	IG good or weak?	Related internal control principle
1	Good	Human resource control
2	Weak	Establishment of responsibility
3	Weak	segregation of duties
4	Good	independant internal verification
5	Good	physical control

1. when employees are required to take vacation chances of indulging in any fraudulent activities reduces.
2. Control is functioned well when 1 employee is given the task. If any one can give credit it reduces the efficiency.
3. When duties are segregated among employees, chances of fraud decreases and we can aasess the performance of one by comparing others.
4. If someone is checking cash receipts who has not other duties involving cash transaction makes strong verification of records.
5. Increases the accuracy and reliability of work by them.