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Internal control

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The following control procedures are used in Elke Company for over the counter cash receipts.
1) Cashiers are experienced, thus they are not bonded
2) All over the counter receipts are registered by three clerks who share a cash register with a single cash drawer.
3)To minimize the risk of robbery, cash in excess of 100 is stored in an unlocked attache case in the stock room until it is deposited in the bank.
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) The company accountant makes the bank deposits and then records the day's receipts.

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 the procedure that will result in good internal control

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Solution Summary

The solution explains the weakness of the internal control procedure and suggests improvements

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1) Cashiers are experienced, thus they are not bonded

Weakness - Cashiers are not bonded, if there is a cash shortfall the firm would not have any insurance
Control Principle - Other controls
Suggestion - Cashiers should be bonded

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

Weakness - Three clerks use the same drawer so ...

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