Question

Current Attempt in Progress 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. Weakness Procedure Principle Violated 1. Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy. Cashiers are not bonded and background checks are not conducted Cash is not adequately protected from theft Inability to establish responsibility for cash on a specific clerk Cash is not independently counted 2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer. The accountant should not handle cash 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 4. 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.

Answer 1

Keaton Company Procedure Principal Violated Human resource controls Nm tin Weakness Cashiers are not bonded and backgound checks are not conducted Inability to establish responsibility Cash is not adequately protected Cash is not independently counted The accountant should not handle Establishment of responsibility Physical controls Independent internal verification Segregation of duties