#2

The following control procedures are used in Bunny's Boutique Shoppe for cash disbursements. (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. The store manager personally approves all payments beforeshe signs and issues checks. Thestore purchases used goods for resale from people that bring items to the store. Since that can occur anytime that the store is open, all employees are authorized to purchase goodsfor resale by disbursing cash from the register. The purchase is documented by having the store employee write on a piece of paper a description of the item that was purchased and the amount that was paid. The employee then signs the paper and puts it in the register. After payment, bills are "filed" in a paid invoice folder. The company accountant, who records cash transactions, prepares the bank reconciliation and reports any discrepancles to the owner