Question

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

1.Latisha Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latisha has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.

2.Marker Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.

3.Sutton Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.

4.The owner of Super Pharmacy uses a check software/printer to prepare checks, making it difficult for ­anyone to alter the amount of a check. The check software/printer, which is not password protected, is on the owner’s desk in an office that contains company checks and is normally unlocked.

5.Lavina Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.

Answer 1

S.No	Internal Controls Violated
1	Lack of Technological Controls
	Password not placed to all Office Computers
	Both Viewing and Editing access Provided to Boss
2	Lack of Independent Reviewer to check the Transactions on day to day basis
3	Lack of Responsibility for Related Transactions
	Same Employee Places Purchase orders and Payments
4	Lack of Technological Controls
	Check Software/printer not Protected by Password
5	Lack of Responsibility for Related Transactions
	Non Segregation of duties
	Same Employee responsible for cash disbursement and Bank account Reconcilation
S.No	Recommendations
1	Place Password to all Office computers and Provide Only view access to Boss
2	Back up shall be taken on Daily basis since data has to be Reviewed on daily basis
3	Place Separate Employee for Purchase order and for making Payments
	Because for Example Mr.A Places Bogus purchase order for $500 on behalf of Company and recives $500
4	Place Password to the Software/Printer so that is Locked and unauthorised Person is not allowed to Take Print out and mistate the Check Amount
5	Place Separate Employee for Purchase order and for making Payments
	For Example Mr.A has to disburse cash to bank on 19.05.2018 but uses amount for personal purpose for 5 days and there after disburses bank
	Since Mr.A is Disburses and reconciles amount no one can find that Mr.A uses the amount for Persnal purpose