You are working on the Coleman audit. Assume that each of the four sections of this question are unrelated. Ashley Wilson, another staff member, has given you the following list of what she refers to as "internal control deficiencies" and has asked you to review each point and make sure that you agree that each is an internal control deficiency.??Agree, this isa control deficiencyDisagree, this is not a control deficiency1.Voided checks are torn up and destroyed.??2.Separate sequences of prenumbered checks are used for each bank account.??3.The purchasing department manager and assistant manager are the authorized check signers.??4.No checks are made payable to cash.??5.The authorized check signers reconcile bank accounts.??6.All cash receipts (checks) received through the
mail are prelisted by the two individuals who open the mail.??7.All cash receipts received through the mail are restrictively endorsed when received.??8.When a disbursement is made based on paper supporting documents, those supporting documents are canceled by the individual who signs the check.??
What will be an ideal response?
1. Agree. Voided checks should be so marked (defaced) and retained so as to allow one to know that they have been voided and are not outstanding.
2. Disagree. One expects separate sequences of numbers of the various accounts, as one overall sequence for various bank accounts is, at best, unwieldy; establishing control over each sequence is generally adequate.
3. Agree. Since the purchasing department employees approve purchases they should not also sign checks.
4. Disagree. Checks should not be made payable to cash as they may be cashed by anyone-properly or improperly.
5. Agree. The authorized signers disburse funds and effective oversight of those disbursements requires account reconciliation by another individual.
6. Disagree. Cash receipts should be so prelisted.
7. Disagree. A policy of restrictively endorsing such receipts (e.g., endorsing the checks as "pay only to Bemco") is a control, not a control deficiency.
8. Disagree. The person signing the check should be the person who perforates (defaces) the checks so as to eliminate the possibility of that support being used again to improperly support another disbursement.
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