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Evaluation of Internal Control Procedures

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Would like some assistance writing an essay on internal control procedures.

Internal Control Procedures - Accounting

Assignment: Read the following case and explain one internal control procedure that would be helpful in this scenario.
Alison Marsh was a trusted employee of Small City State Bank. She was involved in everything. She worked as a teller, she accounted for the cash at the other teller windows, and she recorded many of the transactions in the accounting records. She was so loyal that she never would take a day off, even when she was really too sick to work. She routinely worked late to see that all the day's work was posted into the accounting records. She would never take even a day's vacation because they might need her at the bank. Tick and Tack, CPAs, were hired to perform an audit, the first complete audit that had been done in several years. Marsh seemed somewhat upset by the upcoming audit. She said that everything had been properly accounted for and that the audit was a needless expense. When Tick and Tack examined some of the bank's internal control procedures, it discovered problems. In fact, as the audit progressed, it became apparent that a large amount of cash was missing. Numerous adjustments had been made to customer accounts with credit memorandums, and many of the transactions had been posted several days late. In addition, it was determined that more than $200,000 of funds was missing or improperly accounted for. All fingers pointed to Marsh. The bank's president, who was a close friend of Marsh, was bewildered.

The nine features of an internal control system include (pick one that is relevant in this story and discuss in detail how it would have improved the scenario).

1. Separating duties so that fraud or theft requires collusion
2. Hiring and training competent employees
3. Bonding employees to recover losses through insurance
4. Requiring employees to be absent from their jobs so that their replacements can discover errors or fraudulent activity that might have occurred
5. Establishing proper procedures for processing transactions
6. Establishing clear lines of authority and responsibility
7. Using pre-numbered documents
8. Implementing physical controls such as locking cash in a safe
9. Conducting performance evaluations through independent internal and external audits

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One internal control procedure that would have been helpful is to require employees to take time off from their jobs. This permits another employee to see their work, their process, and make sure that any activities to "cover" for mis-allocated funds are discovered.

Since Alison was able to do so many tasks, she was able to make adjustments in the accounts to ...

Solution Summary

Your response is 206 words and explains a single control that would be appropriate for a small business with a "Jane of all trades" worker that crosses job functions and seems to help with everything. Response is in everyday language suitable for a novice.

See Also This Related BrainMass Solution

Evaluation of Jameson Company's internal controls - raw materials and supplies inventory.

The Jameson Company produces a variety of chemical products for use by plastics manufactures. The plant operates on two shifts, five days per week, with maintenance work performed on the third shift and on Saturday as required.
An audit conducted by the staff of the new corporate internal audit department has recently been completed, and the comments on inventory control were not favorable. Audit comments were particularly directed to the control of raw material ingredients and maintenance materials.
Raw material ingredients are received at the back of the plant, signed for by one of the employees of the batching department, and stored near the location of the initial batching process. Receiving tallies are given to the supervisor during the day, and he forwards the tallies to the inventory control department at the end of the day. The inventory control department calculated ingredients use using weekly reports of actual production and standard formulas. Physical inventories are taken quarterly. Purchase requisitions are prepared by the inventory control department and rush orders are frequent. In spite of the need for rush orders, the production superintendent regularly gets memos from the controller stating that there must be excessive inventory because the ingredient inventory dollar value is too high.

Maintenance parts and supplies are received and stored in a storeroom. There is a storeroom clerk on each of the operating shifts. Storeroom requisitions are to be filled out for everything taken from the storeroom; however, this practice is not always followed. The storeroom is not locked when the clerk is out because of the need to obtain parts quickly.
The storeroom is also open during the third shift for the maintenance crews to get parts as needed. Purchase requisitions are prepared by the storeroom clerk, and physical inventory is taken on a cycle count basis. Rush orders are frequent.


a) Identify the weaknesses in Jameson Company's Internal control procedures used for (1) ingredients inventory and (2) maintenance material and supplies inventory.

b) Recommend improvements that should be instituted for each of these areas.

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