Internal Control

Christina OBanion

Instructor Ellis

ACC/225

Sept. 13, 2009

Internal Control and Bank Reconciliations

Problem 8-1A on p. 338

1. Divide responsibility for related transactions is the principle that has been violated. If Heather records all incoming customer cash receipts, and posts all the payments to their respective accounts, how is the owner going to know if she is being honest with the amounts for the receipts and records. She would be able to steal from the company without anyone knowing about it. If Heather is recording all the customer receipts then someone else should be assigned to post the amounts of all receipts to the accounts. In doing this Heather would be less likely to falsify receipts or records, because someone else would be able to tell if amounts were not adding up.

2. Establish Responsibilities is the principle being violated. Only Jeff is supposed to be in charge of petty cash not Jose when Jeff goes on break. By sharing this duty, how does Jeff know that Jose is not taking petty cash for himself and just writing out receipts to show for the missing money? A person may think they can trust someone, but it is not their money they are in charge of. This company needs to make it clear that only one person is in charge of petty cash and when this person goes on break then people just have to wait until after.

3. Apply technological controls is the principle being violated. Why is Nadine in charge of backing up the computerized accounting system when she deals with posting patient charges and payments? This accounting principle needs to be assigned to someone else, and the tape needs to be stored in someone else’s desk like the owner, manager, or CEO.

4. Perform regular and independent reviews are the principle that has been violated. By giving regular reviews of employees this allows the manager to see that everyone is doing their job properly and without shortcuts, and theft. These reviews should be done once a year and...