At Culotti’s Pizza, a strictly carryout business, the six principles of internal control are present.

Numerous actions exemplify them. Since each person is responsible for his/her task and the
responsibilities established include the authorization and approval to perform these transactions, this
exemplifies the establishment of control (Chase, 2007, p. 1). The cashier, for example, not only has
control over the money and the receipts but also has the authority to take the customers’ money and
hand the customers their orders.

The segregation of duties is evident from the customer view. After all, duties are assigned to different
individuals and record keeping for assets is separate from the physical custody thereof (Chase, 2007, p.
1). For this reason, duties are assigned to individuals without duplication (p. 1). Therefore, each worker
can assess the other’s performance (p. 1, 2). After all, a cashier can assess productivity based upon the
orders received, the time required to complete them and any difference therein. Likewise, a pizza baker
can also assess the pizza makers’ performance based upon the number of orders and the time required
to make the pizza from the time the order is places, etc. The owner, who purchases the ingredients, can
alternately assess performance through various measures. For understandable reasons, this segregation
of duties also decreases potential errors (p. 1). In a sense, it maintains a sense of checks and balances in
accounting. For this reason, this segregation is very important for internal control.

The documentation procedures are embodied within the order receipts, cash register receipts, and
invoices, which are then turned into the owner or accountant (Chase, 2007, p. 2). These documents
record the sales, items ordered and/or time and date of purchase.

The physical, mechanical and electronic controls to safeguard assets include the cash register, the safe
and the alarm system (Chase, 2007, p. 2). For workers, the time clock keeps track of hours worked. The
computer with password-protected files also maintains internal control (p. 2).

Independent internal control in this case means the review of receipts by the manager, owner or
other worker who does not perform cashier duties (Chase, 2007, p. 2). If the owner comes in at odd
times, asks for the day’s receipts and compares them with the drawer, this demonstrates this internal
control (p. 2). Notably, shift change also requires such comparisons. Internal audits could also assess and
address any discrepancies.

Other controls include rotating employee duties and requiring vacations or time-off (Chase, 2007, p.
3). By doing so, this reinforces the independent internal controls, since those employees unfamiliar with
the duties perform them (p. 1, 3).

References

Chase, M.D. (2007). Internal control and cash. Retrieved from http://www.csulb.edu/~mdchase/

500CashandInternalControl.pdf