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Weakness in Internal Control Procedures

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The following control procedures are used at Sandwich Company for over-the-counter cash receipts.

1. 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.
2. All over-the-counter receipts are registered by three clerks who use a cash register with a single cash drawer.
3. The company accountant makes the bank deposit and then records the day's receipts.
4. At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.
5. Cashiers are experienced; they are not bonded.

Instructions:

(a) For each procedure, explain the weakness in internal control, and identify the control principle that is violated.
(b) For each weakness, suggest a change in procedure that will result in good internal control.

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(a) Weakness in internal control and identification of the control principle that is violated.

1. Sandwich Company should not store the excess cash in an unlocked case in the stock room because there is still the risk
of theft and the procedure violates the physical control principle.

2. Sandwich Company should not have three clerks to register all over-the-counter receipts because in case of any mistakes
or discrepancies it would be difficult to identify as to ...

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