Question

Question 3 5 pts The following procedures were recently implemented at Pampered Pets, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, explain why. Make sure your answer is substantive. One word answers for weaknesses will receive full credit. (a) At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. (b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. (c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. (d) Along with the petty cash receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund. HTML Editor

Answer 1

(a) Weakness

Explanation: Clerks are also human beings and there is always a chance for human errors. They can easily make mistakes in entering the amounts while recording the transactions. This would result in a shortage in the cash register when there is actually no shortage but just an error in recording the transaction. The clerks will have to make up for the shortage that is technically not there. This will result in cover up of the mistake that the clerk has made while recording the transaction and by making up for shortage with his own funds, the error will continue to exist in the financial statements.

(b) Strength

Explanation: This is an example of preventive controls. The accounting clerk is not responsible for handling cash. When the accounting clerk compares the duplicate copy of daily cash deposit with the deposit receipt obtained from bank, it is ensured that there are no funds that have not been accounted for.

(c) Strength

Explanation: This represents a strong internal control as the treasurer has to obtain approvals from various departments of the organisation before signing the check. Moreover, after the check is emailed, the voucher ans supporting documents are stamped by treasurer and forwarded to accounts payable clerk for filing.

(d) Weakness

Explanation: Employees personal checks are not to be encashed from petty cash fund. In any case, post dated checks shoulsdnot be accepted.