Question

Question 20--/7 View Policies Current Attempt in Progress Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of the one best internal control principle that is related to the problem described. Internal Control Principles A. Establishment of responsibility B. Segregation of duties C. Physical control devices D. Documentation procedures E. Independent internal verification F. Human resource controls 1. The same person opens the incoming mail and posts the accounts receivable subsidiary ledger. select the code letter 2. Three people handle cash sales from the same cash register drawer. select the code letter 3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise. select the code letter 4. The person who is authorized to sign checks approves purchase orders for payment. select the code letter 5. Some cash payments are not recorded because checks are not prenumbered. select the code letter 6. Cash shortages are not discovered because there are no daily cash counts by supervisors. select the code letter 7. The treasurer of the company has not taken a vacation for over 20 years.

Answer 1

Answer: The correct answers are 1). B. Segregation of duties

2).A. Establishment of responsibility 3). C. Physical control devices

4). B. Segregation of duties 5). D. Documentation procedures 6). E. Independent internal verification 7). F. Human resource controls

Explanation: Internal controls is a system that promotes effectiveness and efficiency, reduces risks of asset loss, ensures the reliability of financial statements and compliance with laws and regulations.

Internal control principles include; Segregation of duties; Establishment of responsibility; Physical control devices; Segregation of duties; Documentation procedures; Independent internal verification and Human resource controls.