See the attached file.
(L. OBJ. 3,5,7,8) Correcting internal control weakness
Each of the following situations has an internal control weakness.
a. Rite-Ways Applications sells accounting software. Recently, development of a new program stopped while the programmers redesigned Rite-Way's accounting system. Rite-Way's accountants could have performed this task.
b. Betty Grable has been your trusted employee for 30 years. She performs all cash handling and accounting duties. Ms. Grable just purchased a new Lexus and a new home in an expensive suburb. As owner of the company, you wonder how she can afford the luxuries because you pay her only $35,000 a year and she has no source of outside income.
d. The office supply company where Champs Sporting Goods purchases sales receipts recently notified Champs that its documents were not pre-numbered. Alex Champ, the owner, replied that he never uses receipt numbers.
e. Discount stores such as Tallon make most of their sales for cash, with the remainder in credt-card sales. To reduce expenses, one store manager ceases purchasing fidelity bonds on the cashiers.
f. Bob's Burger House keeps all cash received from sales in a safe because Bob thinks banks are not "safe".
*Please see attachment.
1. Identify the missing internal control characteristics in each situation.
2. Identify the possible problem caused by each control weakness.
3. Propose a solution to each internal control problem.
The following posting discusses various situations with internal control weaknesses.