Name 1: ___Rivera JIreh Mae A_________________________________________________________ Schedule: __________MW (7:30-9:00) (6:00-7:30)_____________________

Name 2: ___Cabahug Eugel Mae_________________________________________________________ Date: __________September 23 20202_____________________

For each of the given situations:

1. evaluate the segregation of duties system implemented by the company

2. Indicate any control deficiency
3. Indicate the potential misstatements as a result of the poor segregation of duty policy
4. Other controls that might mitigate the risk of misstatements

Situation
Joe’s is a small family-owned
restaurant in a northern resort area
whose employees are trusted. When
the restaurant is very busy, any of the
servers have the ability to operate the
cash register and collect the amounts
due from the customer. All orders are
tabulated on “tickets.” Although each
ticket has a place to indicate the
server, most do not bother to do so,
nor does management reconcile the
ticket numbers and amounts with
total cash receipts for the day.
Deficiency (2 points each)
Servers can have the opportunity of
stealing cash when they operate the
cash register or when they collect it
from customers.
If money is taken from the drawer or
not remitted by the servers, it will
create a discrepancy between the
cash receipts for the day and the total
sales as based on the tickets.
Management wouldn’t be able to find
out the discrepancy because the
ticket numbers and amount of cash
receipts are not reconciled.
Risk (2 points each)
There is a risk of theft of cash
which can lead to major revenue
losses.
There is also a risk of total revenue
misstatement because the only way
it is determined is through
counting the amount of cash
receipts for each day without
taking into account the tickets.
Mitigating control(s) (2 points each)
-To avoid this, only one person should
be assigned in the cash register.
-To strengthen control, management
can also do a close supervision of the
server assigned in the cash register.
-Control cash receipts by matching the
tickets with the amount in the drawer
everytime a certain server ends his/her
shift.
-Conduct surprise/unannounced cash
counts.

Sam’s small retail store company has
segregated the duties of cash
disbursements and cash receipts.
However, the employee responsible
for handling cash receipts also
There is still a deficiency in the
segregation of duties since only one
person is handling cash receipts as
well as reconciling the monthly bank
accounts.
There is a risk that the person in- Duties should be segregated so that the
charge will steal money from what employee who handles cash receipts
he/she receives does not handle the records.
-a risk that he/she will manipulate -
reconciles the monthly bank account. the amounts to make the bank
statement and her record coincide
with others.
Small Mill’s purchasing department is
organized around three purchasing No problem with segregation of This may lead to possible error
agents. The first is responsible for duties. causing an incorrect recording of Reviewing the payments on the
ordering electrical gear and motors, the said transaction from the invoices received by the Purchasing
the second orders fabrication purchasing department. Department can minimize the probable
material, and the third orders nuts misstatements.
There’s a large quantity of documents
and bolts and other smaller supplies
received from the purchasing
that go into the assembly process. To
department such as: (a) a copy of the
improve the accountability to
purchase order, (b) a copy of the
vendors, all receiving slips and
receiving slip, and (c) a copy of the
vendor invoices are sent directly to
vendor invoice to accounts payable
the purchasing agent placing the
for payment.
order. This allows the purchasing
agent to better monitor the
performance of vendors. When
approved by the purchasing agent for
payment, the purchasing agent must
forward (a) a copy of the purchase
order, (b) a copy of the receiving slip,
and (c) a copy of the vendor invoice
to accounts payable for payment.
Accounts payable will not pay an
invoice unless all three items are
present and match as to quantities,
prices, and so forth. The receiving
department reports to the purchasing
department.
Tobias’ store takes customer orders
via a toll-free phone number. The The order taker has complete access The employee could: -To avoid the risk the order taker
order taker sits at a terminal and has on the list of inventory for sale and should only be assigned on getting the
Make a fictitious customer and customer’s order and making a sales
complete access to the customer’s
previous credit history and a list of
inventory available for sale. The
order clerk has the ability to input all
the customer’s requests and generate
a sales invoice and shipment with no
additional supervisory review or
approval.
Reese Company’s payroll is
computerized and is handled by only
one person who is in charge of
payroll and who enters all weekly
time reports into the system. The
payroll system is password protected
so that only the payroll person can
change pay rates or add/delete
company personnel to the payroll file.
Payroll checks are prepared weekly,
and the payroll person batches the
checks by supervisor or department
head for subsequent distribution to
employees.
the customer’s credit history.
He is also responsible for generating
a sales invoice from the customer’s
order and has the direct duty to make
shipments without the need for any
authorization from the higher-ups
and thus can make any fictitious
order and shipments.
Management won’t be able to check
any transactions involved on the sale
which can be manipulated by the
same personnel
The payroll person has access to the
payroll system where he/she enters
all weekly time reports into the
system. The payroll person can
change pay rates or add/delete
company personnel to the payroll file.
charge the invoice to the buyer
while getting the revenue for
himself.
Manipulate any transactions
involved in the sale for he has
access to all duties which is an easy
task to commit in his situation due
to lack of segregation of duties.
There is a risk that the personnel
will adjust the pay rates especially
for those fellow employees who are
close to her.
There is a risk of hour padding in
which he/she will manipulate the
time hours worked of employees
There is also a risk that the
personnel will add ghost/fictitious
employees.
invoice.
-There should be other personnel in
charge of checking the inventory
available for sale
- The management should implement
an authorization process handled by a
supervision when checking the invoices
for shipment to have a better control.
Segregation of duties should be
imposed. A different person should be
assigned in keeping the record of
authorized/active employees.
Paychecks released should be
reconciled to the data regarding the
number of employees, rates and
working hours. Reconciliation should
be done by a separate personnel.
Management should check data records
and the trends of the payroll everytime
there are changes in rates and number
of employees.
Have an independent auditor
periodically look at your books.