Understanding Sarbanes-Oxley and identifying internal control strengths and weaknesses

The following situations suggests a strength or a weakness in internal control.

Top managers delegate all internal control procedures to the accounting department.

Accounting department staff (or the bookkeeper) orders merchandise and approves invoices for payment.

Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each days cash sales.

The employee who signs checks need not examine the payment packet because he is confident the amounts are correct.

Requirements

Define internal control

The system if internal control must be rested by external auditors. What law or rule requires this testing?

Identify each item in the list above as either a strength or a weakness in internal control give your reason for each answer.