The following control procedures are used in Bunnys Boutique Shoppe for cash disbursements (a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated (b) For each weakness, suggest a change in the procedure that will result in good internal control 1 Company checks are stored in an unmarked envelope on a shelf behind the cash register (a) Weakness select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices Principle select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties (b) Recommended Change select a recommended change Bills should be stamped PAID after payment Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Only employees granted authority should make purchases for the store Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller Someone with no other cash responsibilities should prepare the bank reconciliation The store manager should approve bills for payment and the treasurer should sign and issue checks 2 The store manager personally approves all payments before she signs and issues checks (a) Weakness select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices Principle select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties (b) Recommended Change select a recommended change Bills should be stamped PAID after payment Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Only employees granted authority should make purchases for the store Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller Someone with no other cash responsibilities should prepare the bank reconciliation The store manager should approve bills for payment and the treasurer should sign and issue checks 3 The store 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 goods for 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 (a) Weakness select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices Principle select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties (b) Recommended Change select a recommended change Bills should be stamped PAID after payment Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Only employees granted authority should make purchases for the store Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller Someone with no other cash responsibilities should prepare the bank reconciliation The store manager should approve bills for payment and the treasurer should sign and issue checks select a recommended change Bills should be stamped PAID after payment Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Only employees granted authority should make purchases for the store Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller Someone with no other cash responsibilities should prepare the bank reconciliation The store manager should approve bills for payment and the treasurer should sign and issue checks 4 After payment, bills are filed in a paid invoice folder (a) Weakness select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices Principle select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties (b) Recommended Change select a recommended change Bills should be stamped PAID after payment Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Only employees granted authority should make purchases for the store Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller Someone with no other cash responsibilities should prepare the bank reconciliation The store manager should approve bills for payment and the treasurer should sign and issue checks 5 The company accountant prepares the bank reconciliation and reports any discrepancies to the owner (a) Weakness select a weakness Checks are not prenumbered Checks are not stored in a secure area Filing does not prevent a bill from being paid more than once The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Unauthorized employees making purchases Use of cash instead of checks no prenumbered invoices Principle select a principle Documentation Procedures Establishment of Responsibility Human Resource Controls Independent Internal Verification Physical Controls Segregation of Duties (b) Recommended Change select a recommended change

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The following control procedures are used in Bunnys Boutique Shoppe for cash disbursements. (a) For each procedure, explain the weakness in internal control and identify

The following control procedures are used in Bunnys Boutique Shoppe for cash disbursements.

(a)		For each procedure, explain the weakness in internal control and identify the internal control principle that is violated.
(b)		For each weakness, suggest a change in the procedure that will result in good internal control.

1.	Company checks are stored in an unmarked envelope on a shelf behind the cash register.

	(a)	Weakness:	select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.

		Principle:	select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.

	(b)	Recommended Change:	select a recommended change Bills should be stamped PAID after payment.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Only employees granted authority should make purchases for the store.Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller.Someone with no other cash responsibilities should prepare the bank reconciliation.The store manager should approve bills for payment and the treasurer should sign and issue checks.

2.	The store manager personally approves all payments before she signs and issues checks.

	(a)	Weakness:	select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.

		Principle:	select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.

	(b)	Recommended Change:	select a recommended change Bills should be stamped PAID after payment.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Only employees granted authority should make purchases for the store.Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller.Someone with no other cash responsibilities should prepare the bank reconciliation.The store manager should approve bills for payment and the treasurer should sign and issue checks.

3.	The store 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 goods for 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.

	(a)	Weakness:	select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.
			select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.

		Principle:	select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.
			select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.

	(b)	Recommended Change:	select a recommended change Bills should be stamped PAID after payment.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Only employees granted authority should make purchases for the store.Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller.Someone with no other cash responsibilities should prepare the bank reconciliation.The store manager should approve bills for payment and the treasurer should sign and issue checks.
			select a recommended change Bills should be stamped PAID after payment.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Only employees granted authority should make purchases for the store.Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller.Someone with no other cash responsibilities should prepare the bank reconciliation.The store manager should approve bills for payment and the treasurer should sign and issue checks.

4.	After payment, bills are filed in a paid invoice folder.

	(a)	Weakness:	select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.

		Principle:	select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.

	(b)	Recommended Change:	select a recommended change Bills should be stamped PAID after payment.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Only employees granted authority should make purchases for the store.Purchases should be paid with prenumbered checks and the purchases should be documented by a prenumbered invoice signed by the seller.Someone with no other cash responsibilities should prepare the bank reconciliation.The store manager should approve bills for payment and the treasurer should sign and issue checks.

5.	The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

	(a)	Weakness:	select a weakness Checks are not prenumbered.Checks are not stored in a secure area.Filing does not prevent a bill from being paid more than once.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.Unauthorized employees making purchases.Use of cash instead of checks; no prenumbered invoices.

		Principle:	select a principle Documentation Procedures.Establishment of Responsibility.Human Resource Controls.Independent Internal Verification.Physical Controls.Segregation of Duties.

	(b)	Recommended Change:	select a recommended change