Please help me. acc225 Internal control
recommendations
•Complete Exercise 8-1
What internal control procedures would you recommend in each of the following situations?
1. A concession company has one employee who sells T-shirts and sunglasses at the beach. Each
day, the employee is given enough shirts and sunglasses to last through the day and enough cash
to make change. The money is kept in a box at the stand.
2. An antique store has one employee who is given cash and sent to garage sales each weekend. The
employee pays cash for this merchandise that the antique store resells.
An antique store has one employee who is given cash and sent to garage sales each weekend. The
employee pays cash for this merchandise that the antique store resells.
To recommend internal control procedures for each of the given situations, we need to consider the risks associated with each scenario and provide solutions to mitigate those risks.
1. A concession company with one employee:
The primary risks in this situation are the possibility of theft or mishandling of cash and merchandise. To address these risks, the following internal control procedures could be implemented:
a) Separation of Duties: Assign a separate individual to handle cash and monitor inventory. This ensures that no single person has sole control over both the merchandise and the cash.
b) Regular Reconciliation: Implement a system where the employee is required to reconcile the amount of cash and merchandise at the beginning and end of each day. This helps to detect any discrepancies and discourage theft.
c) Physical Security: Install a lockable cash box and secure storage for merchandise to prevent unauthorized access.
d) Proper Documentation: Implement a system to track the inventory, such as using sales receipts or a point-of-sale system. This will help in recording sales accurately and identifying any discrepancies.
e) Supervision and Auditing: Have a supervisor periodically review the employee's activities and conduct surprise audits to ensure compliance with internal control procedures.
2. An antique store with one employee:
The primary risks in this situation are the possibility of the employee misappropriating cash for personal use or not accurately reporting all purchases made on behalf of the store. To address these risks, the following internal control procedures could be implemented:
a) Pre-approval and Documentation: Implement a system where the store owner must pre-approve the cash provided to the employee. The employee should also be required to provide detailed receipts for all purchases made on behalf of the store.
b) Regular Reconciliation: Implement a system where the employee is required to reconcile the cash provided and the items purchased, providing a detailed report of expenses incurred during garage sales. This helps to identify any discrepancies and ensure accuracy.
c) Auditing: Conduct periodic audits of the employee's expense reports and compare them to the actual purchases made. This will help ensure that all purchases are being recorded accurately.
d) Proper Documentation: Maintain a record of all merchandise purchased and sold by the store. This helps track inventory and identify any discrepancies between purchases and sales.
e) Segregation of Duties: If feasible, assign a separate individual to handle payments for purchases made at garage sales, ensuring that no single person has sole control over both the cash and the merchandise.
Remember, these recommendations are just general suggestions, and the specific internal controls should be tailored to suit the unique circumstances of each business.