Learning Team D Assignment

E7-2

Culotti’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customer can see other employees making the pizzas and the large ovens in which the pizzas are baked.

Instructions

Identify the six principles of internal control and give an example of each principle that you might observe when picking up your pizza. (Note: It may not be possible to observe all the principles.)

1) Establishment of Responsibility, depending on whether one or more employees are taking the monies from the customer, could cause a problem with the cash register being short. The manager then would not be able to know the person responsible for this.

2) Segregation of Duties, this internal control is where the customers are seeing different employees making the pizzas. The book did not state if any one employee had a particular job of making the pizza.

3) There is no document procedure in this story.

4) Physical, Mechanical, and Electronic Controls, in the story there is no mention of the company having any of the control methods that would safeguard the company. However, most companies do have alarms to ensure the safety of their company.

5) Independent Internal Verification, this internal control is implemented on the cash register receipt, which must be exact to the amount in the register. The company could explore the option of having an internal auditor that will keep track of all the receipts to ensure the company is safe from employee theft.

6) Other Controls, since employees are handling cash from the customers, each could be bonded, which allows insurance for the company due to the theft of the employees. Rotating employees on the cash register at certain times and making sure each closes their portion of at the