The following control procedures are used in Mendy Langs 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 The company accountant prepares the bank reconciliation and reports any discrepancies to the owner (a) Weakness Checks are not prenumbered After payment, bills are simply filed in a folder The bank reconciliation is not independently prepared The approval and payment of bills is done by the same individual Checks are not stored in a secure area Principle Documentation Procedures Segregation of Duties Physical Controls Establishment of Responsibility Independent Internal Verification Human Resource Controls (b) Recommended Change Bills should be stamped paid before being placed in the folder Checks should be stored in a safe or locked file drawer Checks should be prenumbered and subsequently accounted for The store manager should approve bills for payment and the treasurer should sign and issue checks Someone with no other cash responsibilities should prepare the bank reconciliation 2 The store manager personally approves all payments before signing and issuing checks (a) Weakness After payment, bills are simply filed in a folder The approval and payment of bills is done by the same individual Checks are not stored in a secure area Checks are not prenumbered The bank reconciliation is not independently prepared Principle Human Resource Controls Establishment of Responsibility Segregation of Duties Independent Internal Verification Documentation Procedures Physical Controls (b) Recommended Change 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 Checks should be prenumbered and subsequently accounted for Checks should be stored in a safe or locked file drawer Bills should be stamped paid before being placed in the folder 3 Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register (a) Weakness The approval and payment of bills is done by the same individual After payment, bills are simply filed in a folder Checks are not stored in a secure area Checks are not prenumbered The bank reconciliation is not independently prepared Principle Physical Controls Human Resource Controls Establishment of Responsibility Documentation Procedures Segregation of Duties Independent Internal Verification (b) Recommended Change Checks should be stored in a safe or locked file drawer Checks should be prenumbered and subsequently accounted for Bills should be stamped paid before being placed in the folder 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 Checks are not stored in a secure area The bank reconciliation is not independently prepared After payment, bills are simply filed in a folder Checks are not prenumbered The approval and payment of bills is done by the same individual Principle Segregation of Duties Documentation Procedures Physical Controls Human Resource Controls Establishment of Responsibility Independent Internal Verification (b) Recommended Change Checks should be stored in a safe or locked file drawer The store manager should approve bills for payment and the treasurer should sign and issue checks Bills should be stamped paid before being placed in the folder Checks should be prenumbered and subsequently accounted for Someone with no other cash responsibilities should prepare the bank reconciliation 5 The company checks are unnumbered (a) Weakness Checks are not stored in a secure area Checks are not prenumbered After payment, bills are simply filed in a folder The approval and payment of bills is done by the same individual The bank reconciliation is not independently prepared Principle Independent Internal Verification Human Resource Controls Documentation Procedures Establishment of Responsibility Physical Controls Segregation of Duties (b) Recommended Change Checks should be stored in a safe or locked file drawer The store manager should approve bills for payment and the treasurer should sign and issue checks Bills should be stamped paid before being placed in the folder Checks should be prenumbered and subsequently accounted for Someone with no other cash responsibilities should prepare the bank reconciliation LINK TO TEXTLINK TO TEXT

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

The following control procedures are used in Mendy Langs 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.	The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

(a)	Weakness:	Checks are not prenumbered.After payment, bills are simply filed in a folder.The bank reconciliation is not independently prepared.The approval and payment of bills is done by the same individual.Checks are not stored in a secure area.

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

(b)	Recommended Change:	Bills should be stamped paid before being placed in the folder.Checks should be stored in a safe or locked file drawer.Checks should be prenumbered and subsequently accounted for.The store manager should approve bills for payment and the treasurer should sign and issue checks.Someone with no other cash responsibilities should prepare the bank reconciliation.

2.	The store manager personally approves all payments before signing and issuing checks.

(a)	Weakness:	After payment, bills are simply filed in a folder.The approval and payment of bills is done by the same individual.Checks are not stored in a secure area.Checks are not prenumbered.The bank reconciliation is not independently prepared.

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

(b)	Recommended Change:	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.Checks should be prenumbered and subsequently accounted for.Checks should be stored in a safe or locked file drawer.Bills should be stamped paid before being placed in the folder.

3.	Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.

(a)	Weakness:	The approval and payment of bills is done by the same individual.After payment, bills are simply filed in a folder.Checks are not stored in a secure area.Checks are not prenumbered.The bank reconciliation is not independently prepared.

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

(b)	Recommended Change:	Checks should be stored in a safe or locked file drawer.Checks should be prenumbered and subsequently accounted for.Bills should be stamped paid before being placed in the folder.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:	Checks are not stored in a secure area.The bank reconciliation is not independently prepared.After payment, bills are simply filed in a folder.Checks are not prenumbered.The approval and payment of bills is done by the same individual.

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

(b)	Recommended Change:	Checks should be stored in a safe or locked file drawer.The store manager should approve bills for payment and the treasurer should sign and issue checks.Bills should be stamped paid before being placed in the folder.Checks should be prenumbered and subsequently accounted for.Someone with no other cash responsibilities should prepare the bank reconciliation.

5.	The company checks are unnumbered.

(a)	Weakness:	Checks are not stored in a secure area.Checks are not prenumbered.After payment, bills are simply filed in a folder.The approval and payment of bills is done by the same individual.The bank reconciliation is not independently prepared.

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

(b)	Recommended Change:	Checks should be stored in a safe or locked file drawer.The store manager should approve bills for payment and the treasurer should sign and issue checks.Bills should be stamped paid before being placed in the folder.Checks should be prenumbered and subsequently accounted for.Someone with no other cash responsibilities should prepare the bank reconciliation.