Question

Identify the principle of internal control to each of the following cases. 1. Cash is locked in a safe overnight. 2. Employees who receive shipments of goods do not have access to the accounting records for merchandise. 3. Shipping documents are pre-numbered. 4. The bookkeeper does not have physical custody of assets. 5. Only the treasurer of the company can sign checks.

Answer 1

Answer:

1. Physical control

2. Segregation of duties

3. Documentation

4. Physical control

5. Authorization

Explanation:

1. Cash is locked in a safe overnight.

Principle of internal control: Physical control

Physical control: Only authorized persons should have access to certain assets.

2. Employees who receive shipments of goods do not have access to the accounting records for merchandise.

Principle of internal control: Segregation of duties

Segregation of duties: There should be different personnel for different aspects of the transactions.

3. Shipping documents are pre-numbered.

Principle of internal control:  Documentation

Documentation: Proper documentation should be maintained for the transactions.

4. The bookkeeper does not have physical custody of assets:

Principle of internal control: Physical control

Physical control: Only authorized persons should have access to certain assets.

5. Only the treasurer of the company can sign checks.

Principle of internal control: Authorization

Authorization: The transactions are authorized by the responsible/authorized persons.