Internal Control Weaknesses Identify the internal control weaknesses in each of the following situations, and indicate what change or changes you would recommend to eliminate the weaknesses:

a. The internal audit staff of MacDougall Aerospace, Inc., reports to the controller. However, inter- nal audits are undertaken only when a department manager requests one, and audit reports are confidential documents prepared exclusively for the manager. Internal auditors are not allowed to talk to the external auditors.

b. Alice Walker, president of Northwestern State Bank, a small-town midwestern bank, wants to expand the size of her bank. She hired Fred Howell to begin a foreign loan department. Howell had previously worked in the international department of a London bank. The president told him to consult with her on any large loans, but she never specified exactly what was meant by "large." At the end of Howell's first year, the president was surprised and pleased by his results. Although he had made several loans larger than any made by other sections of the bank and had not con- sulted with her on any of them, the president hesitated to say anything because the financial results were so good. Walker certainly did not want to upset the person most responsible for the bank's excellent growth in earnings.

c. Michael Grant is in charge of purchasing and receiving watches for Blumberg, Inc., a chain of jewelry stores. Grant places orders, fills out receiving documents when the watches are deliv- ered, and authorizes payment to suppliers. According to Blumberg's procedures manual, Grant's activities should be reviewed by a purchasing supervisor. However, to save money, the supervisor was not replaced when she resigned 3 years ago. No one seems to miss the supervisor.