Question

Illustrate your understanding of internal controls by providing an example of a control you have personally witnessed (at the gym, supermarket, a restaurant etc.) – do not use a traditional business setting, such as those detailed in your textbook. In your example make sure you cover the following:

a. Describe the control in detail (including the setting).

b. What was the control trying to achieve (ie. prevent/safeguard)?

c. What specific general ledger account could the control be linked to?

d. What assertion could the control have been addressing (ie. safeguarding)?

e. How could an auditor test the control?

Answer 1

Internal Controls at Gym, Supermarket & Restaurants

1. The Internal controls at that place should be whoever person is coming in market or restaurant billing should be properly done & booked each customer should be given proper invoice so that we can cross check from billing register. 2. There should be maker checker concept of Bill receiving & booking of that bill. 3. Daily Cash book should be tallied with cash sales in Super Markets & Restaurants.

1. The Controls which is to be achieved are not to unrecord some sales or wrong recording of sales or stealing some cash from counter.

1. The Following Ledger Accounts should be checked: A Sales Account B Cash Book C Bank Book D Inventory Accounts

1. The assertion should be to follow maker checker concepts & also Employee absenteeism it means employees should be given frequent leaves in Supermarkets & restaurants So that any fraud done by employee should be checked in absence of employee.

1. The Auditor has to check all the internal controls by checking the inventories, Receipt Books, Matching Cash Books & Bank Books with Sales Register & also to check whether all internal controls are followed or not.