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Explaining Internal weaknesses over cash receipts

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List internal control weaknesses over cash receipts and suggest improvements.

The following control procedures are used in Elke Company for over-the-counter cash receipts.

Cashiers are experienced; thus, they are not bonded.

All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.

To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stock room until it is deposited in the bank.

At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.
The company accountant makes the bank deposit and then records the days receipts.

Instructions:
For each procedure, explain the weaknesses in internal control and identify the control principle that is violated. For each weakness, suggest a change in the procedure that will result in good internal control.

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List internal control weaknesses over cash receipts and suggest improvements.
The following control procedures are used in Elke Company for over-the-counter cash receipts.

Cashiers are experienced; thus, they are not bonded.
Safeguarding of assets (cash in this case) should be covered with employee bonding regardless of their training. It is just good business to be insured against loss. The cost of such insurance is very small compared to the potential for loss.

All over-the-counter receipts are registered by three clerks who ...

Solution Summary

For each of the listed internal control weaknesses, the solution explains the weakness, the possible negative consequences and the type of controls which should be enforced. The specific internal control weakness is reported for each of the four situations for Elke Company.

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