prelecture asignmet 2 chapter 7

q2

The following control procedures are used in Bunny's Boutique Shoppe for cash disbursements. (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. (b) For each weakness, suggest a change in the procedure that will result in good internal control. 1. Company checks are stored in an unmarked envelope on a shelf behind the cash register. (a) Weakness: Principle: (b) Recommended Change: 2. The store manager personally approves all payments before she signs and issues checks. (a) Weakness Principle: (b) Recommended Change: The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store authorized to purchase goods for resale by disbursing cash from the register. The purchase is documented by having the store e paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and putsi (a) Weakness: Principle: 4. After payment, bills are "filed" in a paid irvoice folder. (a) Weakness: Principle: (b) Recommended Change: 5. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner