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:

Alkalosis

A condition characterized by a higher-than-normal blood pH, indicating an excess of bicarbonate or a loss of acids.

Respiratory Rate

The number of breaths a person takes per minute, an important vital sign indicating respiratory and overall health.

Renal Reabsorption

The process in the kidneys where water and solutes are moved from the filtrate back into the bloodstream.

Aldosterone

is a steroid hormone produced by the adrenal glands; it regulates salt and water balance in the body, influencing blood pressure.