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Unit 5 Assignment GAAP Applications – Internal Control

Unit 5 Assignment GAAP Applications – Internal Control

A – Weakness

Within the organization and the GAAP standards, the bank reconciliation needs to be prepared by someone not involved in handling and making cash records. The weakness is a lack of sufficient segregation of duties and responsibilities for the cashier. There is no distinction of duties between the cashier in charge of bank reconciliation and the treasurer who takes the amount in keeping and safeguarding the money. The two have access to records that show the transactions that have been taking place in the organization. Also, they both have access to cash disbursement and the receipts used in the transaction. Having the right people to deal with the money, especially those concerned with the placement of funds, ensures no compromising in situations where errors have been made (Warren, 2014). Segregation of duties is one of the measures that can effectively deal with the weakness. Each of the employees will know the role they have to play in ensuring transparency in their operations. There will be an increased level of performance and an improvement in internal control, especially in promoting integrity in the accounts. The bank’s cashier should not prepare the reconciliations even under the supervision of the treasurer. The two take part in directly dealing with the company’s cash. That implies that it is possible to conspire among themselves and make adjustments in the reconciliation that will affect the organization’s account.

B – Weakness

The principal clerk needs to create a listing of all the cash remittances before taking the cash receipts to the cashier. The strategy will be effective in creating initial accountability over the cash receipts. Also, the same receipt for the cash remittance needs to be forwarded to the clerk in charge of the account’s receivables (Warren, 2014). The primary purpose is to ensure that the information in the receipts has been recorded in the various reports and that the data are credible.

C – Strength

It is a strength because it ensures an increase in the level of keenness among the clerks, especially while handling the cash. That is because they will be aware that there will be a risk of losing money in case there is negligence and absence of due care and skills, and they will have to be held accountable for any of the losses (Warren, 2014). Therefore, there will be an increase in accuracy while carrying out any of the transactions and making records in the books of accounts. In both the short- and long-run possible losses will be minimized.

D – Strength

That is because the bank does not stay with the cash receipts, which in most instances results in theft. There is a high chance that theft is arranged by the stakeholders aware of the amounts and the actual figures. They are also mindful of where the money is kept, making it easy for them to participate in fraudulent activities. When the receipts are brought to the bank’s night depository, it is a strategy for ensuring that all the cash made and deposits and others used to run operations in the company have been accounted for (Warren, 2014). That is because the bank will always notify all the deposits made the next day. If there are variations in the amount deposited, it is possible to launch an investigation immediately.

E – Strength

It is a strength because it creates an opportunity to make the needed comparison. The accounting clerk will compare what the bank receives from the daily deposits to the amounts indicated and the actual deposit made (Financial Accounting Standards Board (FASB), n.d.). The strategy effectively prevents money from being stolen en route to the bank while making the necessary deposits.

F – Weakness

There is a need to have a cash register to make all the cash shortages from personal funds. The strategy will be an incentive for the clerks to short-change the customers. The clerk’s role will be to ensure that there are no needs at the end of each day. There can be an assumption that the clerks can keep any of the overages at the end of the day. That will be another incentive for the clerks to short-change the customers. If any short-changings occur, there will be an increase in the number of complaints from the customers. The best strategy to implement is to make reports of any shortages or overages that might occur at the end of the day. If there is a shortage among the clerks, then there is a need to carry out corrective actions. They include training the clerks or removing them from their posts.

G – Strength

The strategy effectively ensures that the records are kept to verify the payments made, and consideration is placed on the non-payment of the vouchers. When they are stamped as being paid, it implies that the treasurer acknowledges that he took part in the signing and approval of the check. The clerk in charge of the accounts payable will be responsible for saving and stamping the files for any other future reference. When the treasure is done with signing, the voucher will be returned to the clerk in charge of the accounts payable (Yallapragada, Roe, and Toma, 2012). That is one of the ways of ensuring there is proper documentation that can be used as a reference in the future. The focus is on providing evidence that a payment was made. The creditors can’t come again and claim they did not receive their payments in such a situation. Ensuring that the information is filed and the hard copies have been stored in good documentation for record-keeping is an effective and efficient plan. When the check has been signed and sent, there is a need to have a receipt from the organization that follows or a carbon copy of the review that has been sent for reference purposes.

H – Weakness

There are instances where the employees should be allowed to use petty cash to fund their checks. In any instance, post-date bills do not have to be accepted. The checks will indicate the receivables from the employees. An organization should never pay the employees with petty cash funds, nor should they be responsible for providing a post-dated check. In a bank, the teller will never cash a post-dated statement or even deposit because there is a possibility that the fund is not in existence. Petty cash should never be treated as a payroll. As the name suggests, it is little cash, implying that it is meant to manage small office errands such as supplies and postage. The company can even use petty cash to surprise the employees with a treat. The reason is that it is possible to steal the check and be cashed illegally. Also, the written-out employees could realize that there are check-in their names present in the petty cash fund and decide to obtain the receipts and cash them. The action can take place without the consent of the organization’s management. In most instances, the company focuses on the clearance of post-dated checks but still faces the threat of being stolen and cashed (Tyson, 2011). When the post-dated checks are placed in the same area as other expenses, it poses a significant risk to the organization. The issue that might arise is the credibility of their accounts, and the employees will have access to the checks and can easily manipulate the amounts present in the petty cash. That would be possible if they could conspire with the cashier in charge of the little cash. A key solution is for the organization to record the post-dated checks in an unclaimed wage book. There is a need to have a witness for the transaction taking place with a signature from the supervisor. The proposed solution will make it hard for the employees to interfere with the post-dated checks and tamper with the accounts for the organization. Having the needed records will make it easy to ascertain claims in case of fraudulent activities.


Financial Accounting Standards Board (FASB). (n.d.) Technical Agenda. Technical Agenda (

Tyson, T. (2011). The Convergence of IMFS and the US GAAP. CPA Journal, 81(6), 26-31.

Warren, C. (2014). ACP Accounting – AC499, 2nd Edition. [VitalSource Bookshelf Online].

Yallapragada, R., Roe, W. & Toma, A. (2012). The Prospects of Replacing GAAP with IFRS in the United States. International Business and Economics Research Journal, 12(1), 25.


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Unit 5 Assignment GAAP Applications – Internal Control

Recall that in Units 2 and 3, you completed the accounting cycle for Dustin Larkin of Quixote  Consulting. Quixote Consulting is a part-time consulting business that recently moved from Dustin’s  home into rented quarters. 

Assume that you are the internal auditor for the business and you have to evaluate the internal  control procedures that have been implemented in the business.  

There are three objectives of internal control:

Unit 5 Assignment GAAP Applications – Internal Control

Unit 5 Assignment GAAP Applications – Internal Control

(1) Assets are safeguarded and used for business purposes,  

(2) Business information is accurate, and  

(3) Employees comply with laws and regulations.  

The five elements of internal control are:  

(1) The control environment,  

(2) Risk assessment,  

(3) Control procedures,  

(4) Monitoring, and  

(5) Information and communication. 

If you owned a business, you would expect your employees to:  

1) Work to achieve the business goals and objectives you establish. 

2) Use business assets (such as machinery or automobiles) only for legitimate business  purposes and avoid wasting business resources. 

3) Record accurate data regarding business transactions so you could accurately judge how well  your business is doing.

Unit 5 Assignment GAAP Applications – Internal Control

Unit 5 Assignment GAAP Applications – Internal Control

4) Refrain from stealing your cash, supplies, inventory, or property, plant, and equipment. 

In theory, you should be able to expect these things. In practice, however, you must establish an  internal control framework to make sure your business objectives are achieved, assets are protected  from theft and misuse, and financial data are recorded accurately. 

The following eight procedures (A–H) were recently installed by Quixote Consulting: 

A. The bank reconciliation is prepared by the cashier, who works under the supervision of the  treasurer. 

B. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The  cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts  receivable clerk for recording in the accounts. 

C. At the end of the day, cash register clerks are required to use their own funds to make up  any cash shortages in their registers. 

D. At the end of each day, all cash receipts are placed in the bank’s night depository. 

E. At the end of each day, an accounting clerk compares the duplicate copy of the daily cash  deposit slip with the deposit receipt obtained from the bank. 

F. The accounts payable clerk prepares a voucher for each disbursement. The voucher along  with the supporting documentation is forwarded to the treasurer’s office for approval. 

G. After necessary approvals have been obtained for the payment of a voucher, treasurer  signs and mails the check. The treasurer then stamps the voucher and supporting  documentation as paid and returns the voucher and supporting documentation to the accounts  payable clerk for filing. 

H. Along with petty cash expense receipts for postage, office supplies, etc., several post-dated  employee checks are in the petty cash fund. 


A. Indicate whether each of the procedures of internal control represents: 

(1) a strength or, (2) a weakness. For each weakness, indicate why it exists and what procedures  should be put into place to alleviate the risk.

B. For each letter, A–H, you should have at least a one paragraph, thoughtful answer that includes  good critical thinking.

C. Your Assignment must be submitted in a single Word document.

D. The document must use APA formatting and include a proper Running head, Title Page, and  references (Please review the documents placed in Doc Sharing related to APA formatting and  proper formal writing. You may use the file titled “APA Template” and revise it to meet the Assignment  criteria).

E. Use properly formatted headings to organize your paper.

F. You must include proper references and citations for any content not original to you. Also, you  must use independent references/citations to support any “personal knowledge” or “personal  experience” you include in the analysis. Formal writing does not recognize your own personal  knowledge as “common knowledge.” Therefore, proper independent support must be included for any  assertions made.

When you are ready, you may submit your paper on the Dropbox page.

Unit 5 Assignment GAAP Applications – Internal Control

Unit 5 Assignment GAAP Applications – Internal Control

Note: include your name in the filename of the Assignment.  

Unit 5 Assignment Rubric

Category/Description  Points  




Instructor Additional  

Comments (If necessary)

Scenario A 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario B 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario C  

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario D 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario E 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario F 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario G 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Scenario H 

-Correctly Labeled Strength or Weakness? -One Paragraph?



Content Subtotal  24
Analysis & Critical Thinking  10
APA Format/Grammar/Spelling  6
Deductions, Late Penalty, other.  0
Final Total  40


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