[Vanessachy]

You walk into a little boutique in the nearby mall. As you walk up to the cash register with an item that you wish to purchase, you notice that there appears to be only one employee in this small store. With a limited number of personnel in the store at any given time, what would be the best internal control procedure to provide a reasonable guarantee that all cash sales are being rung up properly and cash put in the cash drawer?

A.

Carefully screen all new employees

Incorrect B. Require that all sales be rung up on the cash register using barcodes

C. Increase the minimum number of employees at the store at any given time to three

D. Post a sign in a visible spot near the checkout counter that states, “If you do not get a receipt, your purchase is free.”

The correct answer is D. How come?

Internal controls are designed to provide reasonable assurance that objectives are achieved and compliance to laws and regulations is obtained. All of the items listed would be reasonable control procedures; however, the store receipts may not be able to support a minimum of three employees at the store at any given time. The cost of an internal control procedure is not expected to exceed its benefit. Although it would be important to carefully screen all new employees, it is often difficult to judge an individual’s character during one or two short interviews, and in today’s litigious society, it is often difficult to get valuable information from prior employees or other references.

Following are some of the internal control goals related to this transaction:

Validity: The owner would want only valid, authorized, and legal transactions to be processed. By requiring all transactions to be rung up on the cash register, the owner has the ability to review all transactions. The owner could examine items sold, discounts given, and any other adjustments recorded in sales. However, when only one employee is in the store, it would be difficult to enforce the use of the cash register for cash sales.

Accuracy of recording and evidence of supportability: The owner would want transactions to be recorded free of omissions. By using the customer as a part of the internal control process, the customer can be a “monitor” of the transaction when the owner is not in the store and/or when only one employee is on the selling floor. The transaction would need to be entered into the cash register (recorded) in order to print a register receipt. Given that it may be necessary to have only one employee in the store at slower times during the day, the owner has a final “backup” to have reasonable assurance that the employees are using the other required internal control procedures—thus making this procedure key in the internal control process.

Far, 64 82
Reg, 60 86
Aud, 74 82
Bec, 70 81
Done done done! I did it!!!
Licensed CPA in MA, issued October 2016

Far 10/26/2015, 64, 1/4/2016, 82
Reg 7/10/2015, 60, 2/27/2016, 86
Aud, 5/9/2016, 74 (ouch), 7/26/2016, I cannot wait to take this test again
Bec, 6/10/2016, 70,9/8 retake

[Finally done]

I remember this question. It just let the customer help watch employee's behavior and save the money to install CCTV or something like that.

AUD - 81
BEC - 78
FAR - 79
REG - 84

Keep learn the Life

FAR:76
BEC:78
AUD:74
REG:69
--
Winning is not everything, but the effort to win is.
--Zig Ziglar

[Ginja_CPA]

@Vane, the reason you have a sign posted is in order to deter the employee from scanning the item, telling you the price, and then pocketing the cash. If you require that they hand a receipt to every customer, and the customer is aware of the fact that if they don't receive the receipt the purchase is free, it should reduce the amount of people pocketing money.

If you just require that an employee ring it up with a barcode they could still pocket the money without actually running the sale through the system.

Hope this explanation helps!

AUD - 83
BEC - 78
FAR - 80
REG - 80

If at first you don't succeed, destroy all evidence that you tried!

REG: 80 (02/19/16)
AUD: 83 (04/11/16)
BEC: 78 (05/28/16)
FAR: ?

[Zyx]

I remember this question still and has questions as well. It is just a dump question that does not really make sense realistically. Occasionally we get this type of question.

AUD - 77
BEC - 81
FAR - 80
REG - 77

zyx

REG: 77 x2
BEC: 81 x3
FAR: 68 retake 10/1
AUD: 8/27

[Vanessachy]

Ugh, it still doesn't make sense to me, thanks guys, it is so odd.

Far, 64 82
Reg, 60 86
Aud, 74 82
Bec, 70 81
Done done done! I did it!!!
Licensed CPA in MA, issued October 2016

Far 10/26/2015, 64, 1/4/2016, 82
Reg 7/10/2015, 60, 2/27/2016, 86
Aud, 5/9/2016, 74 (ouch), 7/26/2016, I cannot wait to take this test again
Bec, 6/10/2016, 70,9/8 retake

[Dage]

A receipt ensures that the transaction was recorded because in order to get a receipt they must process the transaction within the POS system. If I sell you an item and do not record it, I can pocket your cash and let you have the item. If I give you a receipt that means it must have been recorded and the cash register must have the amount from your purchase. It wouldn't balance without it so I cannot pocket your cash without being detected. When you tell the customer their purchase is free of they don't get a receipt, it is pretty much guaranteed they will bring the transaction to a managers attentions if they do not get a receipt to receive the free item. That would lead to the manager investigating the issue.

FAR: 90 October 2015
REG: 89 January 2016
AUD: 94 April 2016
BEC: 86 May 2016

Ethics: 93

Wiley CPAexcel
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[Author]

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