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Correcting internal control weakness

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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.

c. Sanchez Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Sanchez later went bankrupt and could not repay the bank.

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.

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Solution Summary

The following posting discusses various situations with internal control weaknesses.

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  • MBA, California State University, Sacramento
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