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QUESTION 21

Listed below are seven errors or problems that might occur in the processing of cash transactions. Evaluate each possible error and cite an internal control principle that would reduce the probability of the error occurring. If no internal control principle would correct the problem, write none. If you think more than one internal control principle is appropriate, list all principles that apply.

Possible Errors or Problems:

1. An employee steals the cash collected from a customer for an account receivable and conceals this theft by issuing a credit memorandum indicating that the customer returned the merchandise.

2. A small fire destroys three days worth of cash receipts.

3. The official designated to sign cheques is able to steal blank cheques and issue them without fear of detection.

4. A sales person, when serving customers, often rings up a sale for less than the actual amount and then keeps the additional cash collected from the customer.

5. Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand.

6. Each cashier counts their own register drawer each day and verbally reports the results to the supervisor.

7. Cashiers with over five years experience are not required to take holidays.

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