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ACCT2110 Financial Accounting Chapter Seven Internal Control and Cash Homework Problem 1. The following control procedures are used at Feliz Company fo 1. All over-the-counter receipts are registered by four clerks who use a cash register with a single cash d r over-the-counter cash receipts 2. To minimize the risk of robbery, cash in excess of $200 is stored in an unlocked drawer in a desk in th . Each clerk counts his/her own receipts at the end of the day and reconciles that amount to the cash regist oom. total . A bookkeeper prepares a journal entry to record the days cash receipts, then deposits the receipts in the bank 5. To save funds, cashiers do not get vacation days Instructions (a) For each procedure, explain the weakness in internal control, and identify the control principle that is violated (b) For each weakness, suggest a change in procedure that will result in good internal control
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Control Procedure No Control Procedure Weakness in Interna Control Principle Change in procedure Control violated suggested All over-the-counter receipts are registered accountability for by four clerks who use a transactions due to cash register with a single cash drawer drawer To minimize the risk of Cash is susceptible to Physical controls The drawer should be locked robbery, cash in excess theft since it is stored for safeguarding at the minimum, or if budget of $200 is stored in an in an unlocked drawer. of assets unlocked drawer in a desk in the back room Inability to fix Establishment of Separate cash drawers should responsibility be used for each of the clerks usage of a single cash permits, the cash should be kept in a safe, and the key to such drawer or combination of the safe should be with a senior official The cash should be counted and reconciled by a supervisor Each clerk counts his/her own receipts at independently the end of the day and counted and thus reconciles that amount there is lack of to the cash register total A bookkeeper prepares Bookkeeping is not a journal entry to record segregated from the days cash receipts, custody of cash, then deposits the receipts in the bank. Cash is not Independent internal verification and Segregation of duties appropriate segregation of duties Segregation of duties Cash should be deposited in the bank by the cashier. The bookkeeper should record the journal entry based on the cash count. 4 allowing any error or theft by the bookkeeper to go undetected To save funds, cashiers Without vacation do not get vacation Human resource Minimum number of vacation days, errors frauds if controls any, committed by the cashiers would go undetected for long days should be made compulsory and employees duties should be rotated periodically ays

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