1. Daily bank deposits do not always correspond with cash receipts.
The time difference between receiving and depositing cash or checks causes bank deposits do not always correspond with cash receipts. That is why bank reconciliation is very important to a company. Performing bank reconciliation improves a company’s internal control especially in cash. To get an effective outcome of internal control, Covington, Inc. can reconcile its bank statement every two weeks instead of every month. Therefore, the accountant can deter fraud and risks earlier.
2. Bad debt write-offs are prepared and approved by the same employee.
The accounting manager is authorized many responsibility including recording and approving general entries. Covington gives too much responsibility to one person, who has opportunities to commit fraud. Covington should separate its employees’ duties. If an employee records the general entries, another employee approves the entries. Segregation of duties is one of the most useful internal control strategies of all companies.
3. There are occasional discrepancies between physical inventory counts and perpetual inventory records. …show more content…
In addition, inventory theft is another reason for the discrepancies. To delete any data in the inventory management system must disclose the reason and need a manager’s approval and signature. The receiving clerks count the inventories every time to conduct their duties and enter the proper number into the inventory management system. If Covington invests in Bar code system or RFID to track its inventory, it will be beneficial to its asset protection and will gain an effective internal control in
The time difference between receiving and depositing cash or checks causes bank deposits do not always correspond with cash receipts. That is why bank reconciliation is very important to a company. Performing bank reconciliation improves a company’s internal control especially in cash. To get an effective outcome of internal control, Covington, Inc. can reconcile its bank statement every two weeks instead of every month. Therefore, the accountant can deter fraud and risks earlier.
2. Bad debt write-offs are prepared and approved by the same employee.
The accounting manager is authorized many responsibility including recording and approving general entries. Covington gives too much responsibility to one person, who has opportunities to commit fraud. Covington should separate its employees’ duties. If an employee records the general entries, another employee approves the entries. Segregation of duties is one of the most useful internal control strategies of all companies.
3. There are occasional discrepancies between physical inventory counts and perpetual inventory records. …show more content…
In addition, inventory theft is another reason for the discrepancies. To delete any data in the inventory management system must disclose the reason and need a manager’s approval and signature. The receiving clerks count the inventories every time to conduct their duties and enter the proper number into the inventory management system. If Covington invests in Bar code system or RFID to track its inventory, it will be beneficial to its asset protection and will gain an effective internal control in