Listed below are five procedures followedby The Beat Company. 1. Several individ

Question

Listed below are five procedures followedby The Beat Company.

1. Several individuals operate the cashregister using the same register drawer.

2. A monthly bank reconciliation isprepared by someone who has no other cashresponsibilities.

3. Ellen May writes checks and also recordscash payment journals entries.

4. One individual orders inventory, while adifferent individual authorizes payments.

5. Unnumbered sales invoices from creditsales are forwarded to the accounting department every four weeksfor recording.

Instructions

Indicate whether each procedure is anexample of good internal control or of weak internal control. If itis an example of good internal control, indicate which internalcontrol principle is being followed. If it is an example of weakinternal control, indicate which internal control principle isviolated. Use the table below.

Procedure    IC Good or Weak?   Related Internal ControlPrinciple

1.

2.

3.

4.

5.

Explanation / Answer

Procedure    IC Good or Weak?   Related Internal ControlPrinciple

1.                  Weak                  Supervision or monitoring of operations

                                                                         (a drawer should response by a single person)

2.                      Strong                     Segregation of duties

3.                      Weak                       Authorization of Transactions

4.                     Strong                     Segregation of duties

5.                       Weak                      Retention of Records

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