Question

As payments are received one mailroom employee is assigned the responsibility of pre-listing receipt and preparing the deposit slip prior to forwarding the receipts deposit slip and remittance advises to accounts receivable for posting accounts receivable Personnel re-foot the deposit slip stamp a restrictive endorsement on the back of each sack and then forward the receipts and deposit slip to the treasury Department evaluate the internal control of the described process which of the following is a reasonable assessment of internal control in this process?

a. adequate internal control
b. inadequate internal control because mailroom employees should not have access to cash
c. inadequate internal control because treasury employees should prepare the deposit slip
d. an adequate internal control because of a lack of separation of duties

Answer 1

The internal control described is inadequate due to the lack of segregation of duties, which increases the risk of errors and fraud. Effective internal control requires duties to be divided among different employees.

Step-by-step explanation:

The internal control process described in the question presents inadequate internal control due to the lack of segregation of duties. When a mailroom employee is tasked with both pre-listing receipts and preparing the deposit slip, there is an increased risk of errors or potential fraud since one individual has control over the entire initial phase of the cash handling process. In an effective internal control system, duties should be segregated to reduce risks; for instance, one employee should pre-list receipts, another should prepare deposit slips, and a third should carry out the deposit, with each step being independently verified.

In the scenario provided, Noel's actions showcase the importance of vigilance and communication in the internal control process. Noel noticed an error and proactively utilized various communication methods to alert the accounting department and related personnel, emphasizing the speed at which corrective action can be induced when potential issues are identified swiftly.