Identify and explain which internal control principles have been violated in this case.?

Question

A sales branch of SOuth Pacific Manufacturing Company has an office consisting of the following employees; branch manager, Nice Mauri, and two assistant, Isa Lei and Peter Wong. The branch has a local bank account in which it deposits cash receipts. Cheques drawn on the bank account require Nice's signature or the signature of R C Kisun, treasurer of the company. Bank statements and paid cheques are returned by the bank to Nice, who retains them in his files after preparing the monthly bank reconcilaition. Reports of disbursements are also prepared by Nice and submitted to Kisun at the home office on scheduled dates.

Answer 1

1. Cheques should be signed by at least 2 officers to prevent fraud and defalcations. Single cheques signatories should always be discouraged.
2. A person should not be allowed to check his own work. If Nice signs cheques, he should not be doing the bank rec. The work performed by one worker should be checked by another.
3. For the same reason, the bank rec prepared by Nice should be checked by someone instead of being filed away by Nice, the preparer.