(TC Os A and E) Your friend, James, has hired you to evaluate the following inte

Question

(TC Os A and E) Your friend, James, has hired you to evaluate the following internal control procedures Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls For the weaknesses, you also need to state a recommendation for improvement. (1) Background checks are required (2) Paychecks are stored in an unlocked safe (3) The Treasurer signs all checks (4) The accountant counts the cash and makes the bank deposit. (5) The company utilizes internal and external auditors

Explanation / Answer

ans)

(1) Background checks are required.

Strength

Reconciliations control procedure is related.

(2) Paychecks are stored in an unlocked safe.

Weakness

There must be a safe locker for the paychecks. Here Access control is missing.

(3) The Treasurer signs all checks.

Weakness

Checks must be signed by other senior officers also. Here Approval authority is missing.

(4) The accountant counts the cash and makes the bank deposit.

Strength

Physical Audits

(5) The company utilizes internal and external auditors.

Strength

Separation of Duties.

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