Question

1.  Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.

2. The store manager personally approves all payments before she signs and issues checks.

3. The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register.

4. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register.

5. After payment, bills are “filed” in a paid invoice folder.

6. The company accountant who records cash transactions also prepares the bank reconciliation and reports any discrepancies to the owner.
   

Answer 1

 

Procedure	Weakness	Principle Violated
1.       Each   week, 100 company checks are left in an unmarked envelope on a shelf behind   the cash register.	Checks are not stored in a secure area.	Physical Controls
2.       The store manager personally approves all   payments before she signs, and issues checks.	The approval and payment of bills is done by the same   individual	Segregation of duties
3.       The store purchases used goods for resale from   people the bring items to the store. Since that can occur anytime that the   store is open, all employees are authorized to purchase goods for resale by   disbursing cash from the register.	Unauthorized employees making purchases	Establishment of responsibility
4.       The purchase is documented by having the store   employee write on a piece of paper a description of the item that was purchased   and the amount that was paid. The employee then signs the paper and puts it   in the register.	Use of cash   instead of checks; no pre-numbered invoices	Documentation   procedures
5.       After payment, bills are “filed” in a paid   invoice folder.	Filing does   not prevent a bill from being paid more than once	Documentation   procedures
6.       The company accountant who records cash transactions   also prepares the bank reconciliation and reports any discrepancies to the owner.	The bank reconciliation is not independently prepared	Independent internal verification