All employees who handle or account for cash are bonded

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Reference no: EM13608124

Erin Company recently changed its system of internal control over cash disbursements. The system includes the following features.

1. Instead of being unnumbered and manually prepared, all checks must now be prenumbered and written by using the new checkwriter purchased by the company.

2. Before a check can be issued, each invoice must have the approval of Karen Noonan, the purchasing agent, and Tom Fah, the receiving department supervisor.

3. Checks must be signed by either Carl Merfeld, the treasurer, or Bonnie Kurt, the assistant treasurer. Before signing a check, the signer is expected to compare the amounts of the check with the amounts on the invoice.

4. After signing a check, the signer stamps the invoice "paid" and inserts within the stamp, the date, check number, and amount of the check. The "paid" invoice is then sent to the accounting department for recording.

5. Blank checks are stored in a safe in the treasurer's office. The combination to the safe is known by only the treasurer and assistant treasurer.

6. Each month the bank statement is reconciled with the bank balance per books by the assistant chief accountant.

7. All employees who handle or account for cash are bonded. Instructions Identify the internal control principles and their application to cash disbursements of Erin Company.

Reference no: EM13608124

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