Chapter 4, Problem 4.46BP

(Learning Objectives 2, 3: Explain the objectives and components of internal control; evaluate internal controls) Each of the following situations reveals an internal control weakness:

1. a. Tom Dickens has been an employee of the city of Fulton for many years. Because the city is small. Dickens performs all of its accounting duties, in addition to opening the mail and preparing bank deposits and bank reconciliations.
2. b. A purchasing agent for Sampson Manufacturing is responsible for buying diamonds for use in the company’s manufacturing process, approving the invoices for payment, and signing the checks. No supervisor reviews the purchasing agent’s work.
3. c. Pam Silk owns an architectural firm. Silk’s staff consists of 19 professional architects, and Silk manages the office. Often, her work requires her to travel to meet with clients. During the past six months, Silk has observed that when she returns from a business trip, the architecture jobs in the office have not progressed satisfactorily. She learns that when she is away, two of her senior architects take over office management and neglect their normal duties. One employee could manage the office.

Requirements

1. 1. Identify the missing internal control characteristic in each situation.
2. 2. Identify each organization s possible problem.
3. 3. Propose a solution to the problem.