The Internal Control over Cash Payments - Assignment Example

The Internal Control over Cash PaymentsIntroduction This paper present responses to three different situations (a, b, and c) that exhibit weakness in the internal control system. The missing internal control measure will be identified in each case, the possible problem each firm faces will be identified and a solution proposed for each situation, as done below.Situation A“In evaluating the internal control over cash payments of Yankee Manufacturing, an auditor learns that the purchasing agent is responsible for purchasing diamonds for use in the company’s manufacturing process, approving the invoices for payment, and signing the checks.

No supervisor reviews the purchasing agent’s work” (The case study A, n.d.). In this case, the missing internal control characteristic is the proper approvals of the purchasing activities. The possible problem of the firm is failure on the part of the purchasing department of the company to supervise and properly approve the company’s purchases. The reason is that the purchasing agent bears the responsibility of approving the invoices and signing the checks without any supervision. This problem can be solved if the purchasing department assumes its supervisory responsibility for the purchasing activities of the company.

Situation B“Rachel Williams owns an architectural firm. Williams’ staff consists of 19 professional architects, and Williams manages the office. Often, Williams’ work requires her to travel to meet with clients. During the past six months, Williams has observed that when she returns from a business trip, the architecture jobs in the office have not progressed satisfactorily. Williams learns that when she is away, two of her senior architects take over office management and neglect their regular duties.

One employee could manage the office” (The case study B, n.d.). In this case, the missing internal control characteristic is lack of separation of duties. The possible problem of the firm is failure on the part of the top management (Rachel Williams, the owner of the firm) to distinguish the duties of the two senior architect, especially in her absence. The possible solution to the problem lies in making one of the senior architects an assistant manager. This way, important tasks will be performed both in the presence and the absence of the manager.

Situation C“Mike Dolan has been an employee of the City of Southport for many years. Because the city is small, Dolan performs all accounting duties, in addition to opening the mail, preparing the bank deposit, and preparing the bank reconciliation” (The case study C, n.d.). In this case, the missing internal control characteristic is lack of segregation of duties. The possible problem of the City is failure to separate the accounting responsibilities from other responsibilities such as opening mails.

The problem can be solved by reducing Dolan’s responsibilities through the creation of more departments such as those that deal with mails.ReferencesThe case study A (n.d.)The case study B (n.d)The case study C (n.d)