QUESTION 21 Listed below are seven errors or problems that might occur in the processing of cash...

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Accounting

QUESTION 21
Listed below are seven errors or problems that might occur inthe processing of cash transactions. Evaluate each possible errorand cite an internal control principle that would reduce theprobability of the error occurring. If no internal controlprinciple would correct the problem, write ‘none’. If you thinkmore than one internal control principle is appropriate, list allprinciples that apply.
Possible Errors or Problems:
An employee steals the cash collected from a customer for anaccount receivable and conceals this theft by issuing a creditmemorandum indicating that the customer returned themerchandise.
A small fire destroys three days’ worth of cash receipts.
The official designated to sign cheques is able to steal blankcheques and issue them without fear of detection.
A sales person, when serving customers, often rings up a salefor less than the actual amount and then keeps the additional cashcollected from the customer.
Three cashiers use one cash register drawer and the cash in thedrawer is often short of the balance kept on hand.
Each cashier counts their own register drawer each day andverbally reports the results to the supervisor.
Cashiers with over five years’ experience are not required totake holidays.

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Solution Sr No Possible Errors or Problems Internal Control Principles 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 See Answer

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