P7-2A The following situations have an internal control weakness.

a. Roberson Computer Programs is a software company that specializes in programs with accounting applications. The company's most popular program prepares the journal. accounts receivable subsidiary ledger, and general ledger. In the company's early days, the owner and eight employees wrote the computer programs, sold the products to stores such as Computer World, and performed general management and accounting. As the company has grown, the number of employees has increased dramatically. Recently, the development of a new software program stopped while the programmers redesigned Roberson's accounting system. Roberson's accountants could have performed this task.

b. Emma Blue, a widow with no known sources of outside income, has been a trusted employee of Stone Products Company for 15 years. She performs all cash-handling and accounting duties, including opening the mail. preparing the bank deposit. accounting for all aspects of cash and accounts receivable, and preparing the bank reconciliation. She has just purchased a new Mercedes and a new home in an expen- sive suburb. Juan Perez, owner of the company, wonders how she can afford these luxuries.

c. Harriet Laman employs three professional interior designers in her design studio. She is located in an area with a lot of new construction, and her business is boom ing. Ordinarily, Laman does all the purchasing of draperies, fabrics, and labor needed to complete jobs. During the summer she takes a long vacation, and in her absence she allows each designer to purchase materials and labor. On her return. Laman observes that expenses are much higher and net income much lower than in the past.

d. Discount stores such as Target and Sam's receive a large portion of their sales revenue in cash, with the remainder in credit-card sales. To reduce expenses, one store manager ceases purchasing fidelity bonds on the cashiers.

e. The office supply company from which Champs Sporting Goods purchases cash receipt forms recently notified Champs that the last shipped receipts were not prenumbered. Alex Champ. the owner, replied that he never uses the receipt numbers. Required 1. Identify the missing internal control characteristics in each situation. 2. Identify the business's possible problem. 3. Propose a solution to the internal control problem.