Below are descriptions of internal control problems. Identify the one best internal control principle that is related to the problem described.
| 1. | The same person opens incoming mail and posts the accounts receivable subsidiary ledger. | Human Resource ControlsPhysical ControlsEstablishment of ResponsibilityIndependent Internal VerificationDocumentation ProceduresSegregation of Duties | ||
| 2. | Three people handle cash sales from the same cash register drawer. | Establishment of ResponsibilitySegregation of DutiesPhysical ControlsDocumentation ProceduresHuman Resource ControlsIndependent Internal Verification | ||
| 3. | A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise. | Human Resource ControlsPhysical ControlsDocumentation ProceduresIndependent Internal VerificationSegregation of DutiesEstablishment of Responsibility | ||
| 4. | The person who is authorized to sign checks approves purchase orders for payment. | Establishment of ResponsibilityDocumentation ProceduresIndependent Internal VerificationPhysical ControlsSegregation of DutiesHuman Resource Controls | ||
| 5. | Some cash payments are not recorded because checks are not prenumbered. | Establishment of ResponsibilitySegregation of DutiesHuman Resource ControlsIndependent Internal VerificationPhysical ControlsDocumentation Procedures | ||
| 6. | Cash shortages are not discovered because there are no daily cash counts by supervisors. | Documentation ProceduresHuman Resource ControlsIndependent Internal VerificationPhysical ControlsSegregation of DutiesEstablishment of Responsibility | ||
| 7. | The treasurer of the company has not taken a vacation for over 20 years. | Independent Internal VerificationSegregation of DutiesDocumentation ProceduresPhysical ControlsEstablishment of ResponsibilityHuman Resource Controls |
1, The same person opens incoming mail and posts the accounts receivable subsidiary ledger.
Ans.Segregation of Duties
2. Three people handle cash sales from the same cash register drawer.
Ans. Establishment of Responsibility
3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.
Ans.Physical Controls Devices
4. The person who is authorized to sign checks approves purchase orders for payment.
Ans.Segregation of Duties
5. Some cash payments are not recorded because checks are not prenumbered.
Ans.Documentation Procedures
6. Cash shortages are not discovered because there are no daily cash counts by supervisors.
Ans. Independent Internal Verification
7. The treasurer of the company has not taken a vacation for over 20 years.
Ans.Human Resource Controls