The following procedures were recently implemented at the Pampered Pets, Inc For each procedure, indicate whether the internal control over cash represents (1 ) a strength or (2 ) a weakness. If it is a weakness, please explain why. (a) At the end of

Question

the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. (b) At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. (c) After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. (d) Along with the petty cash expense receipts for postage, office supplies, etc., several post-dated employee checks are in the petty cash fund.

Answer 1

a. This is a weakness. Requiring cash register clerks to make up any cash shortages from their own funds gives the clerks an incentive to shortchange customers. That is, the clerks will want to make sure that they don't have a shortage at the end of the day. In addition, one might also assume that the clerks can keep any overages. This would again encourage clerks to shortchange customers. The shortchanging of customers will create customer complaints, etc. The best policy is to report any cash shortages or overages at the end of each day. If a clerk is consistently short or over, then corrective action (training, removal, etc.) could be taken.

b. This is a strength.

c. This is a strength.

d. This is a weakness. Employees should not be allowed to use the petty cash fund to cash personal checks. In any case, postdated checks should not be accepted. In effect, postdated checks represent a receivable from the employees.