Question

current attempt in progress
tott company has the following internal control procedures over cash disbursements.
identify the internal control principle that is applicable to each procedure.
a. company checks are prenumbered.
b. the bank statement is reconciled monthly by an internal auditor.
c. blank checks are stored in a safe in the treasurers office.
d. only the treasurer or assistant treasurer may sign checks.
e. check - signers are not allowed to record cash disbursement transactions.

Explanation:

• a. Company checks are prenumbered: Prenumbering checks helps in maintaining an orderly sequence and enables easy tracking and accountability of each check. This is in line with the principle of documentation procedures which ensures that all transactions are properly recorded and documented.
• b. The bank statement is reconciled monthly by an internal auditor: Having an internal auditor (an independent party within the company) reconcile the bank statement ensures that there is an independent review of the cash - related transactions. This adheres to the independent internal verification principle.
• c. Blank checks are stored in a safe in the treasurer's office: Storing blank checks in a safe is a physical measure to protect the company's assets (checks are a form of asset as they can be used to withdraw funds). This is related to the physical controls principle.
• d. Only the treasurer or assistant treasurer may sign checks: Limiting the authority to sign checks to specific individuals (the treasurer or assistant treasurer) is an example of establishment of responsibility. Each check - signing authority is clearly defined and accountable.
• e. Check - signers are not allowed to record cash disbursement transactions: Separating the duties of check - signing (a custody - related function) and recording cash disbursement transactions (a record - keeping function) is in accordance with the segregation of duties principle. This helps prevent fraud as one person cannot both handle the asset (checks) and record the transaction without proper oversight.

Answer:

a. Documentation procedures
b. Independent internal verification
c. Physical controls
d. Establishment of responsibility
e. Segregation of duties