Internal controls (Learning Objective 2) 5–10 min.

Identify the missing internal control in the following situations. Select from these activities:

• Proper authorization

• Separation of duties

• Adequate documents and records

a. While reviewing the records of Discount Drug, you find that the same employee orders merchandise and approves invoices for payment.

b. Business is slow at Play Time Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the owner decides not to use a ticket taker on those nights. The ticket seller is told to keep the tickets as a record of the number sold.

c. When business is brisk, Shop Mart does not give customers a written receipt unless they ask for it.

d. Lynne has worked for Watkins Electric Supply for more than 12 years. Due to her length of employment, she has been allowed to grant sales returns at her discretion.

e. At a grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report.

AppendixLO1