Instructions (a) For each procedure, explain the weakness in anternal control and iden ify the control principle that is violated (b) For each weakness, suggesta charze in the procedure that will resuit in good interua. control. E7-4 The following control procedures are used in Eunny's Boutique Shoppe for cash disbursements. res 1. Each week, 100 company checks are left in an unmarked envelove on a shelf behind the cash register. 2. The store manager personally approves all payments before she signs and issues checks. 3. The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register. The purchase is docu- mented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register. 4. After payment, bills are "filed" in a paid invoice folder. 5. The company accountant prepares the bank reconciliation and reports any discrepan- cies to the owner. Instructions (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. (b) For each weakness, suggest a change in the procedure that will result in good internal control. it red
Instructions (a) For each procedure, explain the weakness in anternal control and iden ify the control principle that is violated (b) For each weakness, suggesta charze in the procedure that will resuit in good interua. control. E7-4 The following control procedures are used in Eunny's Boutique Shoppe for cash disbursements. res 1. Each week, 100 company checks are left in an unmarked envelove on a shelf behind the cash register. 2. The store manager personally approves all payments before she signs and issues checks. 3. The store purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goods for resale by disbursing cash from the register. The purchase is docu- mented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register. 4. After payment, bills are "filed" in a paid invoice folder. 5. The company accountant prepares the bank reconciliation and reports any discrepan- cies to the owner. Instructions (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. (b) For each weakness, suggest a change in the procedure that will result in good internal control. it red
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Instructions
(a) For each procedure, explain the weakness in anternal control and iden ify the control
principle that is violated
(b) For each weakness, suggesta charze in the procedure that will resuit in good interua.
control.
E7-4 The following control procedures are used in Eunny's Boutique Shoppe for cash
disbursements.
res
1. Each week, 100 company checks are left in an unmarked envelove on a shelf behind
the cash register.
2. The store manager personally approves all payments before she signs and issues checks.
3. The store purchases used goods for resale from people that bring items to the store.
Since that can occur anytime that the store is open, all employees are authorized to
purchase goods for resale by disbursing cash from the register. The purchase is docu-
mented by having the store employee write on a piece of paper a description of the
item that was purchased and the amount that was paid. The employee then signs the
paper and puts it in the register.
4. After payment, bills are "filed" in a paid invoice folder.
5. The company accountant prepares the bank reconciliation and reports any discrepan-
cies to the owner.
Instructions
(a) For each procedure, explain the weakness in internal control and identify the internal
control principle that is violated.
(b) For each weakness, suggest a change in the procedure that will result in good internal
control.
it
red
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