The following two events took place at Blue Star Pty Ltd a small business that sells mobile phone accessories. For each event highlight the internal control principle that is lacking and provide evidence from the question to support your answer. Discuss recommendations that the business should implement to overcome the internal control issues.

i. Lucy the cashier, received $1,000 cash from a customer paying his outstanding account. She decided to take the cash for herself so did not record the receipt of the money. As she has access to all customer accounts, she wrote off the outstanding amount as uncollectable

ii. Charlie works in the business’s warehouse, and it is his job to receive inventory from suppliers. On many occasions Charlie does not check the goods received with the purchase order raised by the purchasing staff. Once the goods are received, he sends the delivery docket to the accounting department

One reason for implementing internal controls for a business is because they increase the effectiveness and efficiency of operations, but all internal control systems have limitations. Discuss two limitations of internal controls and provide an example of each limitation

Answer rating: 100% (QA)

Solution a 1 Here a preventive internal control is necessary A preventiv... View the full answer