Question

Indicate whether procedure is good or weak internal control. 1. Several individuals operate the cash register using the same register drawer. 2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities. 3. Joe Cockrell writes checks and also records cash payment entries. 4. One individual orders inventory, while a different individual authorizes payments. 5. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.

Answer 1

The correct answer is the following.

Indicate whether the procedure is good or weak internal control.

1) Several individuals operate the cash register using the same register drawer: Weak. Indeed, very bad practice. It is highly recommended that each individual that operates the cash register have their register drawer or limit the number of individuals for better control purposes.

2) A monthly bank reconciliation is prepared by someone who has no other cash responsibilities: Strong. It is good that an employee who has nothing to do with other cash responsibilities is the one who prepares a bank reconciliation.

3) Joe Cockrell writes checks and also records cash payment entries; Weak. It is recommended that different individuals do these activities to maintain proper control.

4) One individual orders inventory, while different individual authorizes payments: Strong. The control of the inventory is the responsibility of one individual. If many handle the inventory, it increases the risk of lost items or a lack of proper recording.

5) Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording: Weak. This represents total uncontrol of the sales process. All invoices must be numbered to keep proper track of the process.