The following control procedures are used in Mendy Lang\'s Boutique shoppe for c

Question

The following control procedures are used in Mendy Lang's Boutique shoppe for cash disbursements. The company accountant prepares the bank reconciliation and repots any discrepancies to the owner. Weakness: Principle: Recommended change: The store manager peronally approves all payment before signing and issuing and issuing checks. Weakness: Principle: Recommended change: Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. Weakness: Principle: Recommended change: After payment, bills are filedin a paid invoice folder. Weakness: Principle: Recommended change: The company checks are unnumbered. Weakness: Principle: Recommended change:

Explanation / Answer

Weaknesses Principle Suggested Improvement 1 the bank reconciliation is not independently prepared independent internal verification Someone with no other responsibility Relating to cash should be appointed 2 Approval and payment is done by the same Individual Segregation of duties The store manager should approve bills for Payment and treasure should sign and issue Check 3 Checks are not stored in a secure area Physical, mechanical, and electronic controls Checks should be stored in a safe or locked file drawer 4 Filling does not prevent a bill from being paid more than once documentation procedures Bill should be stamped PAID after payment 5 Check are not pre numbered documentation procedures Check should be pre numbered and subsequently accounted for

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