Internal control Memo

Internal control memo

As a new employee at Canyon rental, an outdoor outfitters and
supply shop, your boss has asked you to look at the internal control system
within the store. He is seeking a loan for expansion and must have his books
audited. The auditor asked about his control procedures and documentation. He
has no idea what the auditor is talking about. Your boss has asked you to do
what you need to understand the system and has asked for a memo with your
observations and recommendations by the end of the week. Through interviews and
observation, you notice the following:

1. Purchase
   orders, and sales invoices are not pre-numbered due to the higher cost of
   printing the forms.
2. To
   save time the sales clerk enters the sales at the end of the day into the
   accounting records, prepares the deposit and delivers it to the bank.
3. The
   sales clerk a trusted and long-term employee grants sales returns at her
   discretion.
4. The
   purchasing manager both orders merchandise and approves the payment for
   the order.
5. Betty
   Gamble, the bookkeeper has not taken a vacation in three years.
6. Checks
   are brought to the owner twice a week for signing. He is overwhelmed by
   all of the paperwork and has asked for the checks only on which he stamps
   his signature.

In your memo, give a summary of the elements of an effective
internal control system. Comment on each of your observations and if there is a
weakness provide a solution. Your memo should be 2-3 pages.

Criteria of
writing paper

The demonstrates an
understanding of internal control systems and a summary of the elements of an
effective   internal control system is outlined.

Each observation is discussed
in detail with weaknesses highlighted and recommendations for improvement
listed.

Project as a whole accurately
demonstrates   application of critical thinking skills.

The memo is well organized, in
proper form, with a clearly evident purpose/thesis.