9. INTERNAL CONTROL
Iris needs to consider whether she wishes to purchase one microcomputer system or
three. Assuming that she only wishes to purchase one microcomputer for the
central shop, she should definitely consider an accounting software package that
has an accounts payable and general ledger module. The purchase of a payroll
module will depend upon the number of employees paid each period. Iris will
need to determine if the time saved is worth the cost. The payroll module may
If Iris wishes to purchase a computer for each store then, in addition to the modules
discussed above, she should consider purchasing software that can process point of
sale transactions and balance the cash receipts at the end of the day. Inventory control
Chapter 3 Page 83
management over cash receipts due to errors than a manual system, and if the correct
controls are included, then control may increase. For example, a notice might be placed
over the cash register that states “If you do not get a receipt from the computer, your
Iris may be able to find software specifically designed for florists. She should examine
them to see if they will suit her partially decentralized management. With the correct
10. INTERNAL CONTROL
b) Describe the risks inherent in the system and the physical and computer controls
Chapter 3 Page 84
Risk: Theft of Cash through Coupon fraud. An employee should not be able to ring up a
Risk: Theft of Cash through access to cash register
Control:
Risk: Direct theft of food by employees and employees theft by giving away free food to
friends and relatives.
Chapter 3 Page 85
11. CONTROL WEAKNESSES AND RELATED RISKS
Refer to the system flowchart in the figure labeled Problem 11 in the text.
a. Discuss the uncontrolled risks associated with the system as currently configured.
Chapter 3 Page 86
b. Describe the controls that need to be implemented into the system to mitigate
the risks in (a) above.
12. CONTROL WEAKNESSES AND RELATED RISKS
Refer to the system flowchart in the figure labeled Problem 12 in the text.
Required;
a. Describe the control weaknesses depicted in the system flowchart.
b. Discuss the risks associated with the control weaknesses in identified (a)
above.
Chapter 3 Page 88
INTERNAL CONTROL CASES
1. Solution Smith’s Market
a), b) See diagrams on the following pages.
c) Internal Control Weaknesses
1) Access to the cash drawers by sales clerks requires more accountability.
2) The internal cash register tape should be used as a control to determine how
3) The shift supervisor does not sign for the specific amount of cash received or
d)
Chapter 3 Page 89
Customer
Customer
Process
Sale
Check
Credit
Credit
Card
Cash or
Check
Sales
Approval
Cash Receipt, Credit Card
Receipt
Log,
Count,
Record
and
Deposit
Cash, Check,
Credit Card
Receipt Sales
Journal
General
Ledger
Total
Sales
Amount
Bank
Bank Cash, Check,
Credit Card
Receipt and
Deposit Slip
File
Deposit
Slip
Smith’s Market Sales Order
DFD
Cash
In/Out
Log
Signatu
re
Chapter 3 Page 90
Custom
er
Sales and
Check Out
Treasury Clerk
Proce
ss
Sale
Cash
/
Chec
k
Cred
it
Card
Cred
it
Card
Vouc
her
Rece
ipt
Cash
/
Chec
k
Cred
it
Card
Vouc
her
Bank
Card
Comp
any
Shi(
Supervi
sor
Shi(
Supervi
sor
Cash
/
Chec
k
Cred
it
Card
Vouc
her
Count,
Record
, and
Deposi
t cash
Sales
Jour
nal
Gen
eral
Ledg
er
Bank
Cash
/
Chec
k
Cred
it
Card
Vouc
her
Smith’s Market
Sales System
Flowchart
Dep
osit
Slip
Dep
osit
Slip
Sign
s
Cas
h In
and
Out
Ca
sh
In/
Ou
t
Lo
g
1
2
3
4
5