Please advise if this is correct Locker Rentals Corp LRC ope

Please advise if this is correct

Locker Rentals Corp. (LRC) operates locker rental services at several locations throughout the city including the airport, bus depot, shopping malls, and athletics facilties. Unlike some of the old mechanical at charge a fixed amount per use, LRC\'s lockers operate electronically and are able to charge based on hours of use. The locker system transmits a daily message to LRG\'s office indicating the number of hours that lockers have been used, which the picked up at each location. LRC\'s cash receipts system is described below office manager uses to determine when cash should be Required: 1. For each statement (o)-49). identify the internal control principle being applied Two employees ice manager, one dlerk collects cash from specific locations on the west side of the cily and the other collects from Establish responsibility (cash collection clerks\") are responsible for collecting cash from the lockers. Based on instructions from a the offi specific locations on the east side When each cash collection dlerk returns with the cash, a supervisor counts the cash and prepares a cash count sheel The supervisor summarizes the cash count sheets in a prenumbered daily cash summary and files the prenumbered cash count sheets by date b. Segregate duties C. d. The supervisor places the cash in a locked cashbox untilit is taken to the bank for deposit e. The supervisor, not the cash collection clerks, takes the cash to the bank for deposit The supervisor prepares a duplicate deposit slip, which the bank stamps after the deposit is made to indicate the date and Document procedures Restrict access Segregate duties amount of the deposit The supervisor sends the stamped bank deposit slip and daily cash summary to the accountant, who compares them before preparing a jounal entry debiting Cash and crediting Locker Rental Revenue. g- 2. After several months, LRC\'s supervisor is arrested for stealing nearly $10.000 from the company Identify the internal control weakness that allowed this theft to occur The supervisor was responsible for handling the cash, preparing the cash count sheet, and depositing cash in the bank O The cash collection clerks should have been at least four in number, one for each area-east, west, north, south O The supervisor was not professionally qualified to account for the cash. O The cash collection clerks should have been made responsible for depositing the cash in the bank O The accounting system was not adequate to detect the fraud.

Solution

1. (a) ESTABLISH RESPONSIBLITY

An important characteristic of internal control is the assignment of responsibility to specific individuals. Control is most effective when only one person is responsible for a given task. Establishing responsibility includes the authorization and approval of transactions

(b) DOCUMENT PRODECURES

Companies put internal controls in place to limit risks. Documentation procedures detail the documents that the company requires to implement its control systems and assign responsibility for tasks and actions. Small businesses usually require less documentation or controls than larger operations because each employee carries out several job functions and the responsibilities are clearer. Effective documentation procedures resulting in a minimum of efficient controls can give small businesses a competitive advantage.

(c)  DOCUMENT PRODECURES

(d) RESTRICT ACCESS

(e) SEGREGATE DUTIES

Segregation of duties is the concept of having more than one person required to complete a task. In business the separation by sharing of more than one individual in one single task is an internal control intended to prevent fraud and error.

(f) DOCUMENT PROCEDURES

(g) INDEPENDENTLY VERIFY

Auditing is the process of independently verifying the accounting entries and resulting financial statements of a business or other organization. Independent internal verification works to make sure your employees are following the rules and not shortcutting internal controls. Unlike an external audit, which focuses on financial statement analysis, internal verification analyzes internal accounting controls

2. THE SUPERVISOR WAS RESPONSIBLE FOR HANDLING THE CASH, PREPARING THE CASH COUNT SHEET AND DEPOSITING CASH IN THE BANK

REASON: IT WAS THE PRIMARY DUTY OF THE SUPERVISOR TO HANDLE THE CASH , PREPARE ACCOUNTS RELATING TO CASH AND DEPOSITING IT IN THE BANK. THE COMPLETE AUTHORITY OF CASH VESTED IN THE HANDS OF THE SUPERVISOR WHICH WAS A WEAKNESS IN THE INTERNAL CONTROL SYSTEM AND THUS THE BENEFIT WAS TAKEN BY THE SUPERVISOR STEALING THE CASH.