Listed Below Are Seven Errors or Problems That Might Occur

question 35

Essay

Listed below are seven errors or problems that 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 control devices
d. Documentation procedures
e. Independent internal verification

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Definitions:

Mental Disorder

A condition characterized by significant disturbance in an individual's behavior, emotional regulation, or thought processes.

Unfit To Stand Trial

A legal determination that a person is unable to participate in the court proceedings because of mental incapacity or illness.

Assessment

A procedure in which information is gathered systematically in the evaluation of a condition; it serves as the preliminary to a diagnosis. A psychiatric assessment may include interviews with the patient or the patient’s family, medical testing, psychophysiological or psychological testing, and the completion of self-report scales or other report rating scales.

Insanity Defence

A legal defense by an accused person claiming that they should not be held legally responsible for their actions due to episodic or persistent psychiatric diseases at the time of criminal act.