At the close of each day's business, the sales clerks count the cash in their respective cash drawers and compare the total cash to the cash register tapes. They then prepare a cash memo noting any discrepancies between the actual cash and the cash tapes. An employee from the cashier's office then recounts the cash, compares the total with the memo, and takes the cash to the cashier's office.
1. Indicate the weak link in internal control:
The weak link in this internal control system is that the same sales clerks who handle the cash throughout the day are responsible for counting it and preparing the cash memo at the end of the day. This setup can potentially lead to errors or fraud, as there is a lack of segregation of duties. The clerks could easily manipulate the cash counts and the memo to cover up any discrepancies.
2. Who is best suited to remove the cash register tape from the register, record the total on the memo form, and note any discrepancies:
To strengthen the internal control, an independent employee who does not have access to the cash during the day should be responsible for these tasks. This person could be an employee from the accounting department or an internal auditor. By segregating these duties, it ensures that the person handling the cash is not the same person verifying the cash totals and noting discrepancies, thereby reducing the risk of errors or fraud.
In summary
Record the total on the memo form and note any discrepancies: The same independent employee who removed the tape.
This segregation ensures a more robust internal control system by separating the duties of handling cash and verifying the cash counts.
1. Indicate the weak link in internal control.
Answer: The sales clerks have access to the cash register tapes.
2. Who is best suited to remove the cash register tape from the register, record the total on the memo form, and note any discrepancies?
Answers: An employee of the cashier's office.
Expert Explanation
The weak link in this internal control system is that the same sales clerks who handle the cash throughout the day are responsible for counting it and preparing the cash memo at the end of the day. This setup can potentially lead to errors or fraud, as there is a lack of segregation of duties. The clerks could easily manipulate the cash counts and the memo to cover up any discrepancies.
2. Who is best suited to remove the cash register tape from the register, record the total on the memo form, and note any discrepancies:
To strengthen the internal control, an independent employee who does not have access to the cash during the day should be responsible for these tasks. This person could be an employee from the accounting department or an internal auditor. By segregating these duties, it ensures that the person handling the cash is not the same person verifying the cash totals and noting discrepancies, thereby reducing the risk of errors or fraud.
In summary
Remove the cash register tape from the register: An independent employee from the accounting department or an internal auditor.
Record the total on the memo form and note any discrepancies: The same independent employee who removed the tape.
This segregation ensures a more robust internal control system by separating the duties of handling cash and verifying the cash counts.