LaToya Shaw
Case Study 2-Internal Control
Financial Accounting 504
June 14, 2015

Internal control is very important to any company. It protects a company’s assets, can stop fraud and embezzlement. According to the authors of our book, “Internal control is a plan of organization and a system of procedures implemented by company management and the board of directors designed to accomplish the following: safeguard assets, encourage employees to follow company policy, promote operational efficiency, ensure accurate reliable accounting records, and comply with legal requirements” (Harrison, Horngreen, Thomas 2013). One of the main internal control problems that Williams Oil Services Company is doing, is allowing the receiving clerk to handle too much of the company’s inventory without proper supervision. In this case (situation a), there needs to be a separation of duties. The receiving clerk should not be in charge of the entire inventory. If she is going to order the inventory someone else should be in charge of counting the inventory received at the dock and another person should be in charge of inputting the receipts into the inventory ledger. There should also be someone in charge of reviewing the parts ordered from the receiving clerk. Having too much control in one area can cause fraud and other problems.

Nicole Lopez at Scott Sales Service (situation b) is clearly violating an internal control when she is not requiring the sales team to provide original sales receipts for airline, hotel and car rental. When an employee is working on reimbursement and expense reports an itemize sales receipt is needed to make sure that the person requesting the reimbursement did not over spend what is required of them and only purchase things that are approved by the company. Without an itemize sales receipt, Lopez is taking the sales team word that