Recommendation for Internal Control over Sales and Cash Receipts

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Based on (b), the control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all the other components of internal control, providing discipline and structure for the whole organization. It is important to an entity in the overall attitude and actions of managements. To overcome the weaknesses for the internal control system over sales, the company should have separation of the duties. The company should assign separate cash handlings and accounting duties among various staff members and even various departments, if possible. For example, some company do not allow the person who makes that bank deposits to be the only one running the cash register and do not allow the person who places suppliers’ orders to sign off on checks to suppliers. The company should make sure that cash reporting responsibilities are spread out enough to prevent theft by collusion. This can be done by giving some responsibility to front- line employees, some to front- line manages and some to the upper-levels managers. In this case, the company should assign different people to do for the job. One of the sales clerks prepares the sales invoice, one responsible in pre-numbering the sales invoice and one in charge on receiving the payment where there are cash sales.

On the other hand, collusion is defined the effectiveness of segregation of duties lies in individuals’ performing only their assigned tasks or in the performance of one person being checked by another. To overcome the internal control over sales, the company needs to establish ethical and behavioral standards that are communicated to employees and reinforced by day-to-day practice. The management should remove incentives or opportunities that might lead the personnel to engage in dishonest, unlawful and some unethical acts. Management can best communicate integrity and ethical behavior within the company through the use of policy...
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