Question

Match each of the following cash receipt activities to the internal control principle to which it best relates. Select the appropriate internal control principle from the options below.

1) Segregation of duties
2) Physical controls
3) Authorization
4) Independent internal verification
5) Documentation procedures

Answer 1

In this scenario, several internal control principles can be applied to the cash receipt activities in question: authorization, segregation of duties, independent internal verification, documentation procedures, and physical controls.

Step-by-step explanation:

In this scenario, there are several internal control principles that can be applied:

1. Authorization: The employee should have been authorized to handle the cash drawer, and any discrepancies should have been brought to the attention of a supervisor for investigation and resolution.
2. Segregation of duties: The cashier's responsibilities should have been separated from other employees, such as having someone else count the cash and reconcile the cash drawer.
3. Independent internal verification: Regular audits and checks of the cash drawer should have been conducted by a different employee to detect and prevent any discrepancies.
4. Documentation procedures: The cash receipts and any discrepancies should have been documented properly, including recording the date, time, and the amounts involved.
5. Physical controls: The cash drawer should have been physically secured when not in use to prevent unauthorized access and potential theft.

By following these internal control principles, the retail store could have better identified and resolved any cash discrepancies, rather than labeling the employee as a thief based on suspicion.