Answer:
a. Principle Violated - Physical Controls
Weakness - The cheques are not stored in a secure area and so can be misused if people who find it have ill minds about it.
b. Principle Violated - Segregation of Duty
Weakness - The approval and payment of bills is done by the same individual. This can give rise to the store manager approving fraudulent payments and then authorizing it herself.
c. Principles Violated - . Establishment of responsibility; Documentation procedures
Weakness - Unauthorized employees making purchases.
Not all employees should have the power to approve purchases for resale.
Weakness - Use of cash instead of checks; no prenumbered invoices.
Checks should be used to disburse the cash so that payment may be cancelled if need be. Also prenumbered invoices should be used so that purchases can be tracked.
d. Principle Violated - Documentation Procedures
Weakness - Filing does not prevent a bill from being paid more than once
Just because the bills are filed does not mean that they won't be paid more than once. A more sophisticated method is needed that reflects when a bill has been paid to prevent it being paid for again.
e. Principle Violated - Independent Internal Verification
Weakness - The bank reconciliation is not independently prepared
The bank reconciliation should not be prepared by the same person who has been in charge of the accounting entries in the company. Someone else should do it to ensure that no fraudulent transactions were recorded.
