Unit 5 Assignment Instructions Indicate whether each of the procedures of internal control represents: (1) a strength or (2) a weakness. For each weakness, indicate why it exists and what procedures should be put into place to alleviate the risk. For each letter A through H you should have at least a one paragraph answer. a. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer. I think that this would be weak internal control because you have someone that deals with the money doing the bank reconciliation. This could be set up for inefficiency, errors, and fraud to happen.
It should not be someone that can influence the outcome. The responsibilities should be divided up among different people or departments. b. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts. I think that this could be weak because what I think should happen is that the mail clerk should make the list of the receipts and send it to the manger or supervisor where then it is sent to the account receivable clerk for recording.
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I think by the mail clerk to just send it to the cashier could leave room for errors or fraud. I think that if the mail clerk writes the list and sends a copy even if it is to the cashier there is less than a chance that fraud or errors could happen. c. At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. As much as I would be against this I would say that this is strong. It could stop people stealing if they knew that they would have to use their own funds if there is any shortage.
The only thing is that thieves are smart and when there is a will there is a way. They could just find a way to take the money without having any shortages. But I will say that it could stop some people. d. At the end of each day, all cash receipts are placed in the bank’s night depository. I think that this is weak because you should deposit your cash receipts before 5pm of each day. The problem with the night depository is that there is no one there to safeguard the deposit. It sits there over night and someone could break in and take it. It would be best to deposit it when the bank is open so that it could be recorded that day. . At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. I think that this is a strength because you would be able to see if there is any difference between the two. If there are then that could mean that someone could be pocketing the receipts before being deposited. So doing this at the end of each day is good to keep a check on these things and people would know that you are looking to see if there are any problems. f. The accounts payable clerk prepares a voucher for each disbursement.
The voucher along with the supporting documentation is forwarded to the treasurer’s office for approval. I think that this is strong but could have problems also. It is strong because the person that is doing the vouchers is not the one to approve it. Now if they did work in that office also then it could be a problem. As long as the approval is done by someone different there could be less of a chance of fraud. Now that is not to say that the accounts payable clerk is not preparing fake voucher, but that is something that could be found in an audit. g.
After necessary approvals have been obtained for the payment of a voucher, treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. I think that this is strong because the treasurer is the one sending the payment for the vouchers. Then sending the copy saying paid is a record that is was paid by them. If they would have sent the check to the accounts payable clerk then that could have been a problem that might need to be changed. . Along with petty cash expense receipts for postage, office supplies, etc. , several post-dated employee checks are in the petty cash fund. I think that this is weak; they really should not have any checks that are post-dated in petty cash. Petty cash is not a holding box for checks. It is petty cash for the business to have money on hand when needed. What they should do is put those checks if they feel they need to have them around in a lock box or safe unit they need to be handed out. Now I really don’t think that it is smart to have any post-dated checks around.