For each of these five separate cases, identify the principles(s) of control tha
ID: 2350750 • Letter: F
Question
For each of these five separate cases, identify the principles(s) of control that is violated.Recommend what the business should do to ensure adherence to principles of internal control.
1. Heather Flat records all incoming customer cash receipts for her employer and posts the customer payment to their respective accounts.
2. At Netco Company, Jeff and Jose alternate lunch hours. Jeff is the petty cash custodian, but if someone needs petty cash when he is at lunch, Jose fills in as custodian.
3. Nadine Cox post all patient charges and payments at the Dole Medical Clinic. Each night Nadine backs up the computerized accounting system to a tape and stores the tape in a locked file at her desk.
4. Barto Sayles prides himself on hiring quality workers who require little supervision. As office manager, Barto gives his employees full discretion over their tasks for years has seen no reason to perform independent reviews of their work.
5. Desi West’s manager has told her to reduce cost. Desi decides to raise the deductible on the plant’s property insurance form $5,000 to $ 10,000. This cuts the property insurance premium in half. In a related move, she decides that bonding the plant’s employees is a waste of money since the company has not experienced any losses due to employee theft. Desi saves the entire amount of bonding insurance premium by dropping the bonding insurance.
Explanation / Answer
1 Divide Responsibility for Related Transactions They should hire another employee to post the customer's payment to their respective accounts while Heather Flatt will record all incoming customer cash receipts. This is to ensure that the work of one individual acts as a check on the other. 2 Establish Responsibilities There should proper turnover if it is really necessary for Jose to fill in. Jeff should know how much he left and how much was turned over to him when he came back, and vise versa. This way, they, both Jeff and Jose can establish who is liable when problem arise. 3 Divide Responsibility for Related Transactions Like in No. 1, they should hire another employee to post the customer's payment Nadine will record all charges. This is to ensure that the work of one individual acts as a check on the other. Also, the should consider storing their back ups on more secure places not just in a lock files in their desks. 4 Establish Responsibilities and Perform Regular and Independent Reviews Barto should clearly establishand assign responsibility for a task to his employees because if problem occurs in a company where responsibility is not identified, determining who is at fault is difficult. In addition, this will also help him assess if his employees are efficient or just wasting their time. 5 Insure Assets and Bond Key Employees Desi should continue to bond the employees. Desi might not notice that the reason why the company has not experience any losses due to employee theft is that because bonded employees know an independent bonding company will be involved when theft is uncovered and is unlikely to be sympathetic with an employee involved in theft
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