Question

6-82 Film Processing Write no more than one page about the possible areas where internal controls should be insti- tuted in the following business described briefly. Keep in mind the size of the business, and do not suggest controls of a type impossible to set up in a firm of this sort. Make any reasonable assumptions about management duties and policies not expressly described.

Answer 1

Go into the background and references of all personnel hired, especially drivers (who handle cash) and those in the office who handle cash. Establish control records daily over the amount of cash to be picked up, and reconcile this daily when drivers check back to turn in the cash collected. Assign duties and responsibilities at the office as much as possible, to pinpoint responsibility, maintain quality of work, and get work done on time. It is probably best to control all purchasing of supplies, cash payments, and payroll yourself. Review the payroll time records carefully, possibly daily. Assign one person the duty of computing the amount due on each film order; review his or her work periodically to make sure few if any errors occur. Deposit each day’s receipts that day or the next day, at the latest. Make all payments by pre-numbered check. Keep unused checks under lock and key. Establish work hours and see that they are observed. Establish some controls over supplies and access to them. If a petty cash fund is kept, keep it small and review its activity often. It might be advisable to bond the drivers and your cashier, if one is designated. Make sure regular vacations are taken. The firm may be too small for an audit by an outside CPA, but if outside help is sought in preparing tax returns, ask that accountant to note any areas that might need better controls. Keep locks on all doors; issue keys to as few employees as you consider necessary. Set a policy of locking doors and windows at the end of the day, assigning it to one person in your absence. Verify the mileage of each driver’s route, to make sure his or her mileage reports are correct and possibly set a maximum mileage for each route, assuming each driver always follows the same route.