Listed below are seven errors or problems which might occur in the processing of cash transactions. Also shown is a list of internal control principles. Evaluate each possible error and cite a principle that is listed that would reduce the probability of the error occurring. If none of the principles given will correct the problem, select “None.” If you think more than one principle is appropriate, list all principles that apply.
| Possible Errors or Problems | Internal Control Principles | |||
| 1. | An employee steals the cash collected from a customer for an account receivable and conceals this theft by issuing a credit memorandum indicating that the customer returned the merchandise. | Segregation of Duties and Independent Internal VerificationSegregation of Duties and Physical ControlsPhysical Controls and Human Resource ControlsEstablishment of Responsibility and Physical ControlsIndependent Internal VerificationSegregation of DutiesPhysical ControlsPhysical Controls and Documentation ProceduresEstablishment of Responsibility and Human Resource ControlsSegregation of Duties and Human Resource ControlsNoneIndependent Internal Verification and Human Resource ControlsPhysical Controls and Independent Internal VerificationEstablishment of Responsibility and Independent Internal VerificationDocumentation Procedures and Independent Internal VerificationEstablishment of ResponsibilityDocumentation ProceduresEstablishment of Responsibility and Documentation ProceduresEstablishment of Responsibility and Segregation of DutiesDocumentation Procedures and Human Resource ControlsHuman Resource ControlsSegregation of Duties and Documentation Procedures | ||
| 2. | A small fire destroys 3 days of cash receipts. | Physical Controls and Independent Internal VerificationDocumentation Procedures and Independent Internal VerificationSegregation of Duties and Physical ControlsIndependent Internal Verification and Human Resource ControlsIndependent Internal VerificationHuman Resource ControlsSegregation of DutiesEstablishment of Responsibility and Physical ControlsEstablishment of ResponsibilityPhysical Controls and Human Resource ControlsSegregation of Duties and Documentation ProceduresDocumentation Procedures and Human Resource ControlsSegregation of Duties and Human Resource ControlsNoneEstablishment of Responsibility and Independent Internal VerificationEstablishment of Responsibility and Documentation ProceduresPhysical ControlsPhysical Controls and Documentation ProceduresSegregation of Duties and Independent Internal VerificationEstablishment of Responsibility and Segregation of DutiesDocumentation ProceduresEstablishment of Responsibility and Human Resource Controls | ||
| 3. | The official designated to sign checks is able to steal blank checks and issue them without fear of detection. | Segregation of Duties and Independent Internal VerificationIndependent Internal VerificationEstablishment of Responsibility and Segregation of DutiesHuman Resource ControlsDocumentation ProceduresDocumentation Procedures and Independent Internal VerificationSegregation of Duties and Human Resource ControlsDocumentation Procedures and Human Resource ControlsPhysical Controls and Independent Internal VerificationIndependent Internal Verification and Human Resource ControlsPhysical ControlsSegregation of Duties and Physical ControlsEstablishment of Responsibility and Independent Internal VerificationNoneEstablishment of Responsibility and Documentation ProceduresSegregation of Duties and Documentation ProceduresPhysical Controls and Documentation ProceduresSegregation of DutiesEstablishment of Responsibility and Human Resource ControlsEstablishment of Responsibility and Physical ControlsPhysical Controls and Human Resource ControlsEstablishment of Responsibility | ||
| 4. | A salesclerk in serving customers often rings up a sale for less than the actual amount and then keeps the additional cash collected from the customer. | Documentation ProceduresEstablishment of Responsibility and Segregation of DutiesSegregation of DutiesSegregation of Duties and Physical ControlsPhysical Controls and Human Resource ControlsPhysical Controls and Documentation ProceduresPhysical ControlsEstablishment of ResponsibilitySegregation of Duties and Independent Internal VerificationIndependent Internal VerificationDocumentation Procedures and Human Resource ControlsEstablishment of Responsibility and Physical ControlsNonePhysical Controls and Independent Internal VerificationIndependent Internal Verification and Human Resource ControlsSegregation of Duties and Documentation ProceduresSegregation of Duties and Human Resource ControlsEstablishment of Responsibility and Independent Internal VerificationDocumentation Procedures and Independent Internal VerificationEstablishment of Responsibility and Documentation ProceduresEstablishment of Responsibility and Human Resource ControlsHuman Resource Controls | ||
| 5. | Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand. | Documentation Procedures and Independent Internal VerificationNoneSegregation of Duties and Human Resource ControlsEstablishment of Responsibility and Human Resource ControlsPhysical ControlsHuman Resource ControlsPhysical Controls and Human Resource ControlsEstablishment of Responsibility and Physical ControlsPhysical Controls and Independent Internal VerificationSegregation of Duties and Physical ControlsEstablishment of Responsibility and Independent Internal VerificationSegregation of Duties and Documentation ProceduresSegregation of DutiesDocumentation Procedures and Human Resource ControlsEstablishment of ResponsibilitySegregation of Duties and Independent Internal VerificationIndependent Internal Verification and Human Resource ControlsEstablishment of Responsibility and Segregation of DutiesIndependent Internal VerificationDocumentation ProceduresEstablishment of Responsibility and Documentation ProceduresPhysical Controls and Documentation Procedures | ||
| 6. | Each cashier counts his own register drawer each day and verbally reports the results to the supervisor. | Segregation of Duties and Documentation ProceduresSegregation of Duties and Physical ControlsEstablishment of Responsibility and Physical ControlsDocumentation Procedures and Independent Internal VerificationSegregation of Duties and Independent Internal VerificationEstablishment of Responsibility and Human Resource ControlsDocumentation ProceduresPhysical Controls and Human Resource ControlsPhysical Controls and Independent Internal VerificationPhysical ControlsSegregation of Duties and Human Resource ControlsDocumentation Procedures and Human Resource ControlsIndependent Internal Verification and Human Resource ControlsEstablishment of Responsibility and Segregation of DutiesPhysical Controls and Documentation ProceduresHuman Resource ControlsIndependent Internal VerificationEstablishment of ResponsibilitySegregation of DutiesEstablishment of Responsibility and Documentation ProceduresNoneEstablishment of Responsibility and Independent Internal Verification | ||
| 7. | Cashiers with over 5 years’ experience are not bonded. |
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