Gazarra Company is a very profitable small business. It has not, however, given much

consideration to internal control. For example, in an attempt to keep clerical and office

expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a

result, Johnny Stacatto handles all cash receipts, keeps the accounting records, and prepares

the monthly bank reconciliations.

The balance per the bank statement on October 31, 2010, was $15,453. Outstanding checks

were: no. 62 for $107.74, no. 183 for $127.50, no. 284 for $215.26, no. 862 for $162.10, no.

863 for $192.78, and no. 864 for $140.49. Included with the statement was a credit

memorandum of $340 indicating the collection of a note receivable for Gazarra Company by

the bank on October 25. This memorandum has not been recorded by Gazarra Company.

The company's ledger showed one cash account with a balance of $18,608.81. The balance

included undeposited cash on hand. Because of the lack of internal controls, Stacatto took for

personal use all of the undeposited receipts in excess of $3,226.18. He then prepared the

following bank reconciliation in an effort to conceal his theft of cash.

Bank Reconciliation

Cash balance per book, October, 31 $18,608.81

Add: Outstanding checks

No. 862 $162.10

No. 863 $192.78

No. 864 $140.49 $410.31

$19,019.18

Less: Undeposited receipts $3,226.18

Unadjusted balance per bank, October 31 $15,793.00

Less: Bank credit memorandum 340.00

Cash balance per bank statement, October 31 $15,453.00

All i need from you is that..

Please tell me What principles of internal control were violated in this case?