The following control procedures are used in Bunny's Boutique Shoppe for cash disbursements. 1. Each week, 100
Question:
The following control procedures are used in Bunny's Boutique Shoppe for cash disbursements.
1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.
2. Thestoremanagerpersonallyapprovesallpaymentsbeforeshesignsandissueschecks.
3. The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register.
4. After payment, bills are "filed" in a paid invoice folder.
5. The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.
Instructions
(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.
Step by Step Answer:
Accounting Tools for Business Decision Making
ISBN: 978-1118096895
6th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso