The following control procedures are used in Keaton Company for over-the-counter cash receipts.

(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure

Weakness

Principle Violated

1.
Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy.
Select a weakness in internal control                                                          Cashiers are not bonded and background checks are not conductedCash is not adequately protected from theftInability to establish responsibility for cash on a specific clerkCash is not independently countedThe accountant should not handle cash Select a control principle that is violated                                                          Establishment of responsibilityHuman resource controlsSegregation of dutiesPhysical controlsDocumentation proceduresIndependent internal verification

2.
All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
Select a weakness in internal control                                                          Cash is not adequately protected from theftCashiers are not bonded and background checks are not conductedThe accountant should not handle cashCash is not independently countedInability to establish responsibility for cash on a specific clerk Select a control principle that is violated                                                          Physical controlsSegregation of dutiesIndependent internal verificationEstablishment of responsibilityDocumentation proceduresHuman resource controls

3.
To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stock room until it is deposited in the bank.
Select a weakness in internal control                                                          Cash is not independently countedCash is not adequately protected from theftCashiers are not bonded and background checks are not conductedInability to establish responsibility for cash on a specific clerkThe accountant should not handle cash Select a control principle that is violated                                                          Physical controlsIndependent internal verificationDocumentation proceduresHuman resource controlsSegregation of dutiesEstablishment of responsibility

4.
At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.
Select a weakness in internal control                                                          Cash is not independently countedInability to establish responsibility for cash on a specific clerkCash is not adequately protected from theftCashiers are not bonded and background checks are not conductedThe accountant should not handle cash Select a control principle that is violated                                                          Physical controlsDocumentation proceduresHuman resource controlsEstablishment of responsibilityIndependent internal verificationSegregation of duties

5.
The company accountant makes the bank deposit and then records the day’s receipts.
Select a weakness in internal control                                                          Cash is not independently countedCash is not adequately protected from theftThe accountant should not handle cashCashiers are not bonded and background checks are not conductedInability to establish responsibility for cash on a specific clerk Select a control principle that is violated                                                          Human resource controlsPhysical controlsEstablishment of responsibilityDocumentation proceduresSegregation of dutiesIndependent internal verification

Question

The following control procedures are used in Keaton Company for over-the-counter cash receipts.

(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure	Weakness	Principle Violated
1.	Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy.	Select a weakness in internal control Cashiers are not bonded and background checks are not conductedCash is not adequately protected from theftInability to establish responsibility for cash on a specific clerkCash is not independently countedThe accountant should not handle cash	Select a control principle that is violated Establishment of responsibilityHuman resource controlsSegregation of dutiesPhysical controlsDocumentation proceduresIndependent internal verification
2.	All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.	Select a weakness in internal control Cash is not adequately protected from theftCashiers are not bonded and background checks are not conductedThe accountant should not handle cashCash is not independently countedInability to establish responsibility for cash on a specific clerk	Select a control principle that is violated Physical controlsSegregation of dutiesIndependent internal verificationEstablishment of responsibilityDocumentation proceduresHuman resource controls
3.	To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stock room until it is deposited in the bank.	Select a weakness in internal control Cash is not independently countedCash is not adequately protected from theftCashiers are not bonded and background checks are not conductedInability to establish responsibility for cash on a specific clerkThe accountant should not handle cash	Select a control principle that is violated Physical controlsIndependent internal verificationDocumentation proceduresHuman resource controlsSegregation of dutiesEstablishment of responsibility
4.	At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.	Select a weakness in internal control Cash is not independently countedInability to establish responsibility for cash on a specific clerkCash is not adequately protected from theftCashiers are not bonded and background checks are not conductedThe accountant should not handle cash	Select a control principle that is violated Physical controlsDocumentation proceduresHuman resource controlsEstablishment of responsibilityIndependent internal verificationSegregation of duties
5.	The company accountant makes the bank deposit and then records the day’s receipts.	Select a weakness in internal control Cash is not independently countedCash is not adequately protected from theftThe accountant should not handle cashCashiers are not bonded and background checks are not conductedInability to establish responsibility for cash on a specific clerk	Select a control principle that is violated Human resource controlsPhysical controlsEstablishment of responsibilityDocumentation proceduresSegregation of dutiesIndependent internal verification

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