Question

In: Accounting

Use internal control to answer: 1.In your store, bank deposit slips did not match cash receipts....

Use internal control to answer:

1.In your store, bank deposit slips did not match cash receipts.

2.Your store had an unusual number of bounced checks. The same employee was responsible for approving each of the bounced checks.

Questions:

What errors may occur?

What internal controls may prevent this problem in the future?

Solutions

Expert Solution

1) Bank deposit slips did not match cash receipts

This concern could have resulted in the failure to secure checks and cash received from customers. Also, there could also be a lack of separation of duties for handling the bank deposits. Another risk is that the stores do not have a bank reconciliation system set up to ensure that cash records are accurate.

To prevent this problem in future, there should be a proper bank reconciliation system setup. There should be segregation of duties so that a single person will not have control over the recording and actual cash receipts.

2) Store had an unusual number of bounced checks. The same employee was responsible for approving each of the bounced checks.

This concern could have resulted in the fact that same employee is responsible for approving bounced checks. This is a segregation of duties issue and this type of issue can lead to fraudulent activity. Also, another risk could be that there is not someone else assigned to verify there is enough funds in the account. The problem with the bank deposit slips not matching the cash receipts could have also caused this concern.

To prevent this problem in future segregation of duties is required and a person should be appointed to verify the funds and activity of funds. By using these controls this problem can be prevented.


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