Culotti’s Pizza operates purely on a carryout footing. Customers pick up their orders at a counter where a clerk exchanges the pizza for hard currency. While at the counter. the clients can see other employees doing the pizzas and the big ovens in which the pizzas are baked. Instruction manuals: Identify the six rules of internal control and give and illustration of each rule that you might detect when picking up your pizza. ( Note: It may non be possible to detect all principles. ) The six rules of internal control are constitution of duty. Physical. mechanical. and electronic controls. segregation of responsibilities. independent internal confirmation. certification processs. and other controls. 1. Constitution of duty: Constitution of duty depends on if one or more employees are having money from the client. If this is the instance it could do an issue with the hard currency registry coming up abruptly. The director would so hold trouble finding which single is responsible for the deficit. 2. Physical. mechanical. and electronic controls: Physical controls pertain to safeguarding of assets. and records that help protect the company’s assets. Mechanical and Electronic controls safeguard assets and assist escalate the truth of and duty of the records in accounting.
Physical. Mechanical. and Electronic controls are imperative which include illustrations such as Safes. and safety sedimentation boxes. storage cabinets that are used for stock list and records. base on balls cardinal entree in companies. dismaies. telecasting proctors. and clip redstem storksbills for entering of clip. 3. Segregation of responsibilities: Segregation of responsibilities embodies the thoughts that duty related activities should be delegated to different persons and that record maintaining for an plus should be kept separate from the physical detention of that same plus. When a client walks into Culotti’s Pizza they can see employees doing the pizzas in the oven country. The detention of the plus ( in this instance the pizza ) is being kept separate from the forepart counter clerk. The front counter clerk stays out of the kitchen and is responsible for pealing up the sale in the registry system ( documenting the sale ) and trading payment for the merchandise. These are two responsibilities that are within client position that are kept unintegrated. 4. Independent Internal Confirmation: When walking in to pick up a pizza a client may see one employee on the hard currency registry taking the hard currency from the clients to pay for the pizza.
This employee is designated by the proprietor to keep detention of the hard currency on manus. This internal control makes it easy for the proprietor to track down the individual responsible if there are any disagreements with the hard currency at the terminal of the twenty-four hours. A client may besides detect the employee when he or she is reading the registry tape. This employee is verifying the minutess on the registry tape with the hard currency that is in the drawer to do that each the sum of each dealing is accounted for by the hard currency that is in the drawer. 5. Documentation processs: In the event of this narrative. there are no papers processs. 6. Other Controls: In effect of employees managing the hard currency from the clients. each employee could be bonded. which allows insurance for the concern due to the larceny of the employees. Revolving the employees on the hard currency registry at set times and doing certain each closes their part at the terminal of his or her displacement. The process will let the company to look into each drawer and do certain it is right. Finally. the company can make a background cheque on their employees. This information will supply the company with the information on possible employees and if he or she has of all time been charged with a offense that relates to theft from another company.
Chapter 7 PROBLEM SET B: P7-2B ( PAGE 359 )
The board of legal guardians of a local church is concerned about the internal accounting controls refering to the offering aggregations made at hebdomadal services. They ask you to function on a three-person audit squad with the internal hearer of the university and a CPA who has merely joined the church. At a meeting of the audit squad and the board of legal guardians you learn the followers: 1. the church’s board of legal guardians has delegated duty for the fiscal direction and audit of fiscal records to the finance commission. This group prepares the one-year budget and approves major expenses but is non involved in aggregations or record maintaining. No audit has been made in recent old ages because the same sure employee as unbroken church records and served as fiscal secretary for 15 old ages. The church does non transport any fidelity insurance. 2. The aggregation at the hebdomadal service is taken by a squad of Usshers who volunteer to function for 1 month. The Usshers take the aggregation plates to a cellar office at the rear of the church. They manus their home bases to the caput Ussher and return to the church service. After all home bases have been turned in. the caput Ussher counts the hard currency received.
They head usher so places the hard currency in the church safe along with a notation of the sum counted. The caput usher voluntaries to function for 3 months. 3. The following forenoon the fiscal secretary opens the safe and recounts the aggregation. The secretary withholds $ 150- $ 200 in hard currency. depending on the hard currency outgos expected for the hebdomad. and deposits the balance of the aggregations in the bank. To ease the sedimentation. church members who contribute by cheque are asked to do their cheques collectible to “Cash” . 4. Each month the fiscal secretary reconciles the bank statement and submits a transcript of the rapprochement to the board of legal guardians. The rapprochements have seldom contained any bank mistakes and have ne’er shown any mistakes per book. Instruction manuals:
( a ) Indicate the failing in internal accounting control in the handling of aggregations. One failing in the internal accounting control for managing aggregations includes the comprehensive usage. In the event of internal audit control systems. they can be really wide in their application that creates a weaker audit control system ( Vitez. O ) . A failing in the handling of aggregations found could besides be one since the hard currency is handled by multiple Usshers and can go clip devouring. This failing besides becomes hard for direction state of affairss for the church members that attempt to keep the proper concern patterns. The 2nd failing is the deficiency of cognition that the persons that handle and record the money have. If the Usshers that count and record the money do non cognize how to decently enter the fund this could take to deficits. ( B ) List the betterments in internal control procedures that you plan to do at the following meeting of the audit squad for ( 1 ) the Usshers. ( 2 ) the caput Ussher. ( 3 ) the fiscal secretary. and ( 4 ) the finance commission. The Usshers will be on a rotary motion for a set sum of clip so ; every Ussher will at some point hold the duty of roll uping the offering. A squad of appointed Usshers will take up the aggregation. The ushers will so take the aggregation to the back country of the church where the financess are counted. Once the money has been collected the Usshers will so manus off the aggregation of financess to the caput usher. The caput usher will tell the financess received from the aggregation. and topographic point the financess into the church safe along with a entire count of the financess that were collected. Improvements for the Financial Secretary: After re-counting the hard currency she should enter how much was collected on an accounting record and enter how much she kept on manus for that hebdomad and how much she deposited in the bank on this same record. Checks should be made collectible to the name of the church for illustration “Saint Josephs or The First Baptist Church. ”
Improvements for the Finance Committee: The finance commission should hold audits conducted at least one time a twelvemonth at random. The finance commission should run a background cheque on all members who handle hard currency. The finance commission should supervise the board of legal guardians and take concluding expression at all fiscal records. The finance commission should acquire fidelity insurance. ( degree Celsius ) What church policies should be changed to better internal control? Audited accounts should be done on a regular basis to guarantee the truth and that fiscal records are being completed ethically. I would propose making it on a quarterly footing. Additionally. the church should instantly obtain fidelity insurance. I see no job with the monthly rotary motion of Usshers who collect the donated financess ; nevertheless they should remain in the cellar office and serve as a informant to the numeration of donated financess.
The caput Ussher should make full out a signifier saying how much has been received in hard currency and how much in cheque contributions. The financess should so be placed in a certain bag with the initials of those present written on the seal. Fundss can go on to be placed in the church safe. The fiscal secretary demands to find how much money is needed for the hebdomadal outgos and subject this sum along with the certain bag of contributions to the bank. She should so watch the bank verify the sum of hard currency and look into contributions in the certain bag. The full sum should be deposited and the fiscal secretary should so withdrawal the sum needed for the hebdomad either by backdown faux pas or look into. Everything should be exhaustively documented in the bank’s fiscal records. Additionally. contributions made in the bank signifier should ne’er be written to hard currency but instead to the church itself to see cheques are traveling to the church and non for personal usage. The fiscal secretary’s reconciled bank statement should be reviewed exhaustively by another individual before submittal to the board of legal guardians.
Mentions:
Kimmel. P. D. . Weygandt. J. J. . & A ; Kieso. D. E. ( 2007 ) . Fiscal accounting: Tools for concern determination devising ( 4th ed. ) . Hoboken. New jersey: John Wiley & A ; Sons. Vietz. Osmond. Weaknesses in an Internal Audit Control System. ( 2012 ) . hypertext transfer protocol: //www. smallbusiness. chron. com/weaknesses-internal-audit-control-system-3810. html Williams. J. R. . Haka. S. F. . & A ; Bettner. M. S. ( 2005 ) . Financial & A ; managerial accounting: The footing for concern determinations ( 13th ed. ) . New York. New york: McGraw-Hill Companies.
