Listed Below Are Seven Errors or Problems Which Might Occur

question 202

Essay

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 write "None." If you think more than one principle is appropriate list all principles that apply.
Possible Errors or Problems
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.
2. A small fire destroys 3 days of cash receipts.
3. The official designated to sign checks is able to steal blank checks and issue them without fear of detection.
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.
5. Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand.
6. Each cashier counts his own register drawer each day and verbally reports the results to the supervisor.
7. Cashiers with over 5 years' experience are not bonded.
Internal Control Principles
a. Establishment of responsibility
b. Segregation of duties
c. Physical controls
d. Documentation procedures
e. Independent internal verification

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Definitions:

German Firm

A business or company that is registered, headquartered, or primarily operates within Germany.

U.S. Firm

A company or business that is registered and operates in the United States of America.

U.S. Dollars

The recognized monetary unit of the United States is represented by the symbol $.

Malaysian Ringgits

The currency of Malaysia, symbolized as RM, used for all financial transactions within the country.