Smith Computers and Supplies limited has the following internal Controls implemented

in their business:
1. Establishment of responsibilities
Control is most effective when a person is solely responsible for a given task. This
includes the authorization and approval of transactions. In Mr. Smith’s company one
worker deals with cash, the accounting clerk keeps books, the other deals with services
and repairs and the Mr. Smith, the owner,  organizes where stock is displayed, labels it
and assists customers. 
2. Segregation of duties
All work in an organization is divided so that no one person has control overt every
aspect of the operation. The work of one employee should without duplication of effort,
provide a reliable basis for evaluating the work of another employee. In this firm, there
isn’t much segregation of duties.
3. Physical, mechanical and electronic controls
Physical controls relate primarily to the safeguarding of assets. Mechanical controls
improve accuracy and reliability of accounting information. Electronic controls may be in
the form of electronic burglar alarm systems, cameras as well as tags that must be
detached upon payment. See table 1.0 to view how Mr. Smith applies this principle to his
business

Table 1.0 showing the application of Physical, mechanical and electronic controls 
Control Application 
(P/M/E)
Physical  Burglar proofing cage at the entrance
Expensive items are placed in a glass cage
Safe in thr back room of the store
The owner lives on the premises, allowing him to monitor the store at
night and public holidays 
The store is built in an open room to avoid theft in plain view
Filing cabinet to store important paperwork 
Mechanical  Uses linx and credit card system to avoid having an excessive amount
of cash on hand
The owner has insurance to cover stock 
Electronic  There is buzzer at the entrance of the store to alert the owner 
An alarm system is implemented with vigilance
All data stored in the computer is backed up
The business uses the accounting software: Peachtree, which monitors
stock level and notifies the owner when to reorder. 

4. Documentation procedures
Documents provide evidence that transactions and events have occurred. All documents
should be pre-numbered and accounted for. In addition to using Peachtree, Mr. Smith’s
firm uses excell to generate invoices and pre-numbered cheques. Peachtree helps to
monitor debtors and suppliers. Lastly Smith has a filing cabinet where he stores all his
paperwork.
5. Independent internal verification 
This is also known as internal check. This involves the review, comparison and
reconciliation of data prepared by employees. Companies should verify records
periodically or on a surprise basis, an employee who is independent of the personnel
responsible for the information should make the verification and discrepancies and
exceptions should be reported to the management. In this company, the accounting clerk
checks on the cashier and correlates with the respective bills. Moreover, Mr. Smith’s
accounts are audited and reconciled by the accountant.
6. Other controls:
•Bond employees who handle cash
Bonding involves obtaining insurance protection against misappropriation of assets by
dishonest employees. 
•Rotate employees’ duties and require employees to take vacations
These measures deter employees from attempting any thefts as they will be unable to
permanently conceal their improper actions. 
•Conduct thorough background checks
To reduce employee theft and fraud, conduct through background checks. Mr. Smith does
not have these controls.

Table 2.0 showing a summary of the internal controls implemented in Smith Computers
and Supplies Limited
Internal Control  Yes or
No
Establishment of responsibilities  Yes
Segregation of duties No 
Physical, mechanical , electronic control Yes
Documentation procedures  Yes
Independent internal verification  Yes
Other controls:        bond employees/rotation of duties & Vacations/ No
background checks