The following control procedures are used at Torres Company for over-the-counter
ID: 2445674 • Letter: T
Question
The following control procedures are used at Torres Company for over-the-counter cash receipts.
a.)
b.) For each weakness, suggest a change in procedure that will result in good internal control.
1. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stockroom until it is deposited in the bank.
2. All over-the-counter receipts are registered by three clerks who use a cash register with a single cash drawer
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. Cashiers are experienced; they are not bonded.
For each procedure, explain the weakness in internal control, and identify the control principle that is violated.Explanation / Answer
1. Cash in excess of 100 stored in stock room
It will create a practical difficulty of handling cash. The minimum cash should be kept in cash box to enable the cashier to meet petty expenses.
The petty cash balance should not be kept in any other premises
Stockroom is not a sfe place to keep cash. It is the place were inventory kept. It is also kept in unlocked attache case.
The excess cash ie over and above petty cash should kept in safe lockers. The counter cash reaches a particular level it should be moved to safe locker. Any amount deposited or taken from safe lockers are cross checked by a manger level person and properly entered in the attached register. It should have double key system. One with cashier and second one with checking officer.
At the end of the day the balance amount should deposit in abnk.
2. Single cash drawer for all three cashiers
Fixing responsibility is not possible if single cash drawer is used by three cashier.
Each cashier should have their on cash box/ cash drawer. He is fully responsible for keeping the same up to date.
Every day morning befor opening trasaction he should check the balance in drawer physically and record the same in register. One senior officer should witness the same. At the day end all the receipts and payment vouchers should be addedd/ deducted from opening balance and make sure that it will tally with physical cash balance. The same should be recorded in physical register and signed. The senior officer should cross check the same.
3.Bank depsosit recorded as day receipt
It is an accounting error. All bank deposits are contra entry
It reduces cash and increase bank balance. The accountant should collect daily cash report from all cashiers and entered the same in Main cash book. The bank deposit vouchers are prepared and duely authorised by a senior manager.
He should ensure that the amount deposited in bank and cash book entry are same.
Also periodical bank reconciliation enble to rectify these type of errors.
4. Total receipts are counted and reconciled to cash register.
This is a proceedural error.
The cashier should add the total receipt vouchers. The total of recept vouchers plus opening balnce should be equal to physical cash. is there any difference he shouild reconcile and report to senior officer.
The day end repprt of cashier should be verified by his senior officer. The cash should be physically counted and along with day end report it should be handed over to reporting officer.
5.Cashiers are experienced but not bonded
The position of cashier requires intrergrity. He is in a fudiciary relation with company.
Experience is good but bounded is more important. The company can relay him. He should be trustworthy and loyal.
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