Question

As payments are received, one mailroom employee is assigned the responsibility of prelisting receipts and preparing the deposit slip prior to forwarding the receipts, deposit slip, and remittance advices to accounts receivable for posting. accounts receivable personnel re-foot the deposit slip, stamp a restrictive endorsement on the back of each check, 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) Strong internal control
B) Weak internal control
C) Moderate internal control
D) No internal control

Answer 1

The described process exhibits weak internal control. Option B is correct.

Step-by-step explanation:

The described process lacks segregation of duties, risking errors or fraud, as one employee handles both prelisting receipts and preparing deposit slips, enabling potential manipulation or mishandling of funds, indicating weak internal control. The absence of segregation of duties in the described process presents a significant internal control issue.

Having one mailroom employee responsible for both prelisting receipts and preparing deposit slips creates a risk of errors, mismanagement, or even fraudulent activities. This concentration of duties increases the likelihood of intentional or accidental mishandling of funds, compromising accuracy and reliability. The lack of independent checks or oversight before forwarding to accounts receivable further weakens control.

Additionally, the absence of a clear reconciliation process or secondary verification before sending documents to the treasury department heightens the risk of undetected errors or discrepancies. Therefore, the internal control in this process is weak due to the absence of segregation of duties and checks and balances.

Correct Answer: B) Weak internal control