Rabbit Ears Pet Food Ltd recently changed its system of internal control over cash disbursements. The system includes the following features.

Instead of being unnumbered and manually prepared, all cheques must now be prenumbered. Before a cheque can be issued, each invoice must have the approval of Cindy Morris, the purchasing manager, and Ray Mills, the receiving department supervisor. Cheques must be signed by either Frank Malone, the accountant, or Mary Arno, the assistant accountant. Before signing a cheque, the signer is expected to compare the amounts of the cheque with the amounts on the invoice.

After signing a cheque, the signer stamps the invoice ‘paid’ and inserts within the stamp, the date, cheque number and amount of the cheque. The ‘paid’ invoice is then sent to the accounting department for recording.

Blank cheques are stored in a safe in the accountant’s office. The combination to the safe is known by only the accountant and assistant accountant. Each month the bank statement is reconciled with the bank balance per books by the assistant managing director.

Required

Identify the internal control principles and their application to cash disbursements of Rabbit Ears Pet Food Ltd.