Instead of being unnumbered and manually prepared all

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Luby office supply company reccently changed its system of internal control over cash disbursements. The system includes the following features.

Instead of being unnumbered and manually prepared, all checks must not be prenumbered and written by using the new checkwriting machine purchased by the company. Before a check can be issued, each invoice must have the approval of sally Morgan, the purchasing agent, and John contryman, the receiving department supervisor. Checks must be signed by either Ann Lynn, the treasurer, or Bob Skabo, the assitant treasurer. Before signing a check ,t he signer is expe cted to compare the amount of the check with the amount on the invoice..

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

Blank checks are stored in a safe in the treasurer's office. The combination to the safe is kjnown only by the treasurer and assistant treasurer. Each onth, the bank statement is reconciled with the balance per books by the assistant chief accountant. All employees who handle or account for cash are bonded.

Instructions: Identify the internal control principles and their application to cash disbursement of Luby Office Supply company.

Reference no: EM13599848

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