Unformatted text preview: Judgment Case 7-5 on page 391 Required: For each of the following independent situations, indicate the apparent internal control weaknesses and suggest alternative procedures to eliminate the weaknesses. 1.John Smith is the petty cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the fund. John should not be the only person involve in this process. A critical aspect of an internal control system is the separation of duties. The petty cash custodian should not be involved in the process of writing or approving checks, nor in recordkeeping. In addition, management should arrange for a surprise counts of the fund. 2. All of the company’s cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a...
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- Fall '11