Private Company (PC) is in its fourth year of retail operations. The owner/manager of PC previously employed a part-time bookkeeper to prepare and sign cheques, prepare the cash reconciliations, and prepare annual financial statements. PC has just hired you as the first full-time accountant to replace the bookkeeper, and you are preparing the December 31, 2012 financial statements.
Required:
a. Briefly explain the concept of “segregation of duties” to PC’s owner/manager.
b. Identify the internal control issues relating to cash and provide your recommendations to improve PC’s internal controls over cash.