The following procedures were recently implemented by SUP Yoga Co.
Expert explanation
Let's evaluate the internal control procedures at SUP Yoga Co. and determine whether each represents a strength or a weakness.
Each cashier is assigned a separate cash register drawer to which no other cashier has access.
Instructions: Indicate whether each of the procedures of internal control over cash represents a strength or weakness.
1. Each cashier is assigned a separate cash register drawer to which no other cashier has access.
Answer: Strength
2. All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register.
Answer: Strength
3. At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages.
Answer: Weakness
4. Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank.
Answer: Weakness
5. Vouchers and all supporting documents are stamped PAID after being paid by the treasurer.
Answer: Strength
6. Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee.
Answer: Strength
7. The bank reconciliation is prepared by the accountant.
Answer: Weakness
Let's evaluate the internal control procedures at SUP Yoga Co. and determine whether each represents a strength or a weakness.
Each cashier is assigned a separate cash register drawer to which no other cashier has access.
Strength. This procedure helps to maintain accountability, as each cashier is responsible for their own cash drawer. It reduces the risk of theft and discrepancies since it is clear who is responsible for any cash shortages or overages.
All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register.
All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register.
Strength. This ensures that all sales are properly recorded and that there is a reliable audit trail. Providing receipts to customers helps prevent fraud and errors, and locking the record inside the cash register protects the sales data from unauthorized access.
At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages.
At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages.
Weakness. While it is good practice for cashiers to reconcile cash at the end of their shifts, allowing the cashier to unlock the cash register record themselves can lead to potential manipulation. It would be stronger to have a second person verify the count to ensure accuracy and prevent fraud.
Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank.
Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank.
Weakness. This creates a segregation of duties issue. Ideally, different individuals should be responsible for recording the collections and depositing them in the bank to prevent misappropriation of funds. For example, one person could open the mail and list the checks, while another person records them and a third deposits them.
Vouchers and all supporting documents are stamped PAID after being paid by the treasurer.
Vouchers and all supporting documents are stamped PAID after being paid by the treasurer.
Strength. This procedure helps to prevent duplicate payments and provides a clear record that the voucher has been processed. Stamping documents as PAID after payment ensures that the same voucher is not mistakenly paid again.
Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee.
Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee.
Strength. This ensures that all petty cash disbursements are properly documented and that there is a record of the transaction. Requiring a signed receipt from the payee helps to maintain accountability and track petty cash usage.
