The following questions pertain to internal control. Consider each situation separately.
1. Wong Company requires that all documents supporting a cheque be cancelled (stamped Paid) by the person who signs the cheque. Why do you think this practice is required? What might happen if it were not?
2. Separation of duties is an important consideration if a system of internal control is to be effective. Why is this so?
3. Cash may be a relatively small item on the financial statements. Nevertheless, internal control over cash is very important. Why is this true?
4. Many managers think that safeguarding assets is the most important objective of internal control systems, while auditors emphasize internal control's role in ensuring reliable accounting data. Explain why managers are more concerned about safeguarding assets and auditors are more concerned about the quality of the accounting records.