Internal Control - Case Study Example

Comments (0) Cite this document
In the scenario outlined in the textbook, question 55, the cashier at Easy Company was able to divert $500 from the company to his personal use. The example showed a situation where there were almost no controls in place. By instituting controls at several points in the system, Company A could have prevented this type of embezzlement.
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.9% of users find it useful
Internal Control
Read TextPreview

Extract of sample "Internal Control"

Internal Control In the scenario outlined in the textbook, question 55, the cashier at Easy Company was ableto divert $500 from the company to his personal use. The example showed a situation where there were almost no controls in place. By instituting controls at several points in the system, Company A could have prevented this type of embezzlement.
The first place that Company A should institute a control is at the point where the checks are mailed to someone other than the person handling the account. If this control had been in place, the cashier would not have been able to write himself the check. The $500 check would have had to be mailed to someone other than the cashier. In addition to the cashier being unable to write a check to himself, the checks should have been kept under lock and key. This would require another person to authorize the writing of a check.
The ability of the cashier to deposit a check into petty cash would have been avoided by the use of an imprest account. That would have required the petty cash fund to be replenished through a voucher system. The cashier would not have been able to make a deposit without the cooperation of another individual. All petty cash payments and deposits are then accounted for.
The situation also could have been avoided by segregating the duties of the payment from the petty cash fund and the deposit into the fund. This again would limit the ability of the cashier to make the fund appear reconciled by the diversion of other funding. In addition, the bank reconciliation should be accomplished by someone other than the person writing the checks. The cashier was able to falsify the reconciliation to cover the movement of the funds. If an independent individual had done the reconciliation, his crime would have been prevented.
The cashier should also not have been allowed to alter the invoice that was sent to Customer A that reflected the $500 payment. Here again, the cashier had access to the incoming payments as well as the customer invoice. It would be important to limit the duties of the cashier and place a barrier between the payments received and the accounts receivable. Finally, the Easy Company needs to have a policy of conducting random checks on cash accounts. This would have given the Company an opportunity to find the diverted funds and uncover the crime.
Internal controls on cash accounts can limit any one employee from diverting funds for their personal use. Limiting an employee's duties to either payment or deposit is mandatory. Involving more than one individual in the management of an account is also needed. The system of internal controls centers around involving multiple individuals, each with limited duties. It is then the responsibility of the company to conduct independent, random audits.

Works Consulted
Bodnar, George H., and William S. Hopwood. Accounting Information Systems. 9th ed. Upper Saddle River, NJ: Prentice Hall, 2004.
University of California. Understanding Internal Controls. Oakland, CA: University of California Office of the President, n.d. 31 May 2007 . Read More
Cite this document
  • APA
  • MLA
(“Internal Control Case Study Example | Topics and Well Written Essays - 500 words”, n.d.)
Internal Control Case Study Example | Topics and Well Written Essays - 500 words. Retrieved from
(Internal Control Case Study Example | Topics and Well Written Essays - 500 Words)
Internal Control Case Study Example | Topics and Well Written Essays - 500 Words.
“Internal Control Case Study Example | Topics and Well Written Essays - 500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Audit and Internal Control Issues

...?Report Jean-Pierre Christophe CEO, SUCRE DELIGHTS LTD Manager 23 May Audit and Internal Control Issues - Sucre Delights Limited Keeping in view the weaknesses in the internal control and management practices in relation to maintaining effective internal control, different areas of concerns are discussed in this report. The first part of the report identifies the major risks, which the company faces at present and the ways in which these risks can be eliminated. In the second part, the report discusses the information required and procedures to be performed for the purpose of audit planning and risk assessment of the entity. In the next section, the report identifies the tests of controls to be performed for obtaining sufficient... in...
6 Pages(1500 words)Coursework

Internal Control

...? One of the most important business functions is accounting. Accounting deals with the recording, tracking, and monitoring of financial transactions. The end result of the accounting cycle is the preparation of financial statements. Due to the importance of accounting companies must implement internal controls in order to protect itself. Two of the primary goals of internal controls are safeguarding the assets of a company and to prevent against fraud. Three of the main components of an internal control system are the control environment, control procedures, and the accounting system. Some factors that...
3 Pages(750 words)Essay

Audit and Internal Control, the finance director has asked for an audit report detailing the security status of the system. Data will be input in the computers from workstations, and there is risk of unauthorized access to this data at this point. Data from satellite stations will be transmitted through the internet, and there is the risk of this data getting accessed by unauthorized individuals either remotely or otherwise. The finance director has specifically asked for a description of the general controls that can be exercised to avert unauthorized access to the computer system from remote workstations. These may be the remote workstations of the company's staff or the remote workstation of a computer hacker. The director also asked for...
7 Pages(1750 words)Essay

Internal Control Failures Paper

...Running Head Internal Control Failures Paper Internal Control Failures Paper Rules of internal control generally are regarded as belonging within the self-disciplinary purview of professional associations, but talk of rules or standards for financial reporting often gives rise to concern that because such rules affect something loosely called "the public interest," their formulation should not be entrusted to the private sector. The case of the World Bank shows that internal control failures result in organization and stakeholder losses, have a negative impact on the image of the organization, its cash...
6 Pages(1500 words)Essay

Internal Control System

...Recommendation of Internal Control for Purchases, Payables, and Payments Auditing ID: 200204942 Bachelor of Business Administration- Accounting November 22, 2009 Table of Contents Executive Summary 3 Overview of Internal Audit and Internal Control 4 Internal Control Objectives 5 Internal Control Procedures on Acquisitions/Purchases 6 Internal Control Procedures on Payables 10 Internal Control Procedures on Payments 12 Conclusion 13 Works...
13 Pages(3250 words)Essay

: Internal Control - Accounting Information Systems

...INTERNAL CONTROL Topic: Internal Control - Accounting Information Systems Write a memo to the CEO of Big Australian Company to explain why internalcontrol is important to the business in general. MEMO TO: CHIEF EXECUTIVE OFFICER, Big Australian Company FROM : Auditor Internal control1 comprises the plan of organization and all the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies. Internal control main function is to minimize or eliminate fraud or error in the preparation of financial statements mainly divided... and procedures...
4 Pages(1000 words)Essay

Audit and Internal Control

...Running head: AUDIT AND INVENTORY CONTROL Audit and Inventory Control s Introduction: The discussion about auditing gap is based on the hypothesis that it was not the failure of auditing mechanisms or the expectation gap, which lead, to the collapse of different organisations such as Enron but the perversion of the governance model, which caused the disaster. Essentially, the basic issue was not fraud detection by the auditors but the alleged act of in concealment which done the damage. Nevertheless, there is still no conclusive empirical evidence in the literature about whether and how auditing mechanisms influence the performance and the value of the firms; and, about how these mechanisms interact (in a...
7 Pages(1750 words)Essay

Internal Control, and Cash

...Inventory control system Yoder Brothers Grocery Stores like any other store can safeguard inventory in many ways. The suggested way in the conversation is one of them though it has a high chance of being overstepped. To prevent checkout clerks from stealing inventory, I would suggest that the store installs an integrated security system. The system should be able to detect inventories fitted with keepers, bottle security for wines, wraps, hard tags, and show safe on high theft and most expensive items before they reach the cashier. On the low risk and theft items, every cashier should be installed with a security scanning system that detects every bar code from any corner of the item. This will avoid any cashier passing...
1 Pages(250 words)Personal Statement

Internal Control

...Case Study: Internal Control Table of Contents Table of Contents 2 Introduction 3 LJB Company: Going Public 3 Question 1 3 Question 2 4 Question 3 4 Summary and Conclusion 5 Introduction Internal control in auditing and accounting is defined as the process that assures the objectives of an organization are achieved in operational efficiency and effectiveness, policies and regulations, compliance with laws, as well as reliable financial reporting (Trenerry, 2009). It is a broad concept that entails everything which controls an organization’s risks. At organizational level, objectives of internal control relate to...
2 Pages(500 words)Case Study

Internal Control

...The Sarbanes-Oxley Act (SOX) of 2002 was developed by the U.S. Congress in order to provide accountability to the financial markets after a series offinancial scandals such as the Enron debacle created a lack of confidence in the markets from investors (Peavler, 2015). One of the biggest problems that was identified in the Enron scandal was the lack of internal controls to prevent shady executives from stealing money from corporations. As a direct consequence the Sarbanes-Oxley Act created section 404 of the Act which dealt directly with the internal controls that corporations had to abide to in order to comply with the Act. Section 404 of the Sarbanes-Oxley Act states...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Internal Control for FREE!

Contact Us