eygam, rnancial Accounting, 0e FINANCIAL ACC CALCULATOR STANDARD VIEW PRINTER VE

Question

eygam, rnancial Accounting, 0e FINANCIAL ACC CALCULATOR STANDARD VIEW PRINTER VERSION ES Exercise 7-2 The following control procedures are used at Torres 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. (b) For each weakness, suggest a change in procedure that will result in good internal control. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stockroom until it is deposited in the bank. (a) Weakness: Principle: (b) Recommended Change: 2. All over-the-counter receipts are processed by three clerks who use a cash register with a single cash drawer udy (a) Weakness: Principle (b) Recommended Change 3. The company accountant makes the bank deposit and then records the day's receipts (a) Weakness: Principle: (b) Recommended Change: 4. At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total

Explanation / Answer

1 Answer :-

(a) Weakness: Cash is not properly kept in a secured place therefore it is not protected from theft.

Principles: Here applies physical controlled

(b). Recommended change: It is advisable to sleep the cash in a safe secured place till the time it is deposited into the bank.

2 Answer :-

(a). Weakness: Not capable to take the responsibility for cash with a respective clerk

Principle: Responsibility Established

(b). Recommended change : should initiate seperate cash drawers and also register codes for each respective clerk

3 Answer :-

(a). Weakness: The accountant is not responsible for handling cash and therefore he or she should not be given the responsibility of managing the cash in hand.

Principles: Segregation of duties

(b). Recommended change : The cashiers department should make the deposits into the bank and accountants should not be made responsible for depositing the cash into the bank accounts because it is not his responsibility.

4 Answer :-

(a). Weakness : Cash should not be counted independently or manually

Principle : Internal independent verification

(b). Recommended change : A cashier office supervisor should be made responsible for counting the cash.

5 Answer :-

(a). Weakness :- Cashiers are not bounded

Principle : Human Resource Management effective Controls

(b). Recommended change :- Most importantly all cashiers should be bounded.

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