Instructions: Answer all questions. 1. Why is the separation of duties an important control activity in a good system of internal control? 2. A retailer takes a physical inventory at the end December. When the physical count is compared to the perpetual Inventory records, the actual inventory counted at year end is found to be much lowe that indicated by the perpetual inventory. The merchandise inventories of some stores were off more than others, but all had deficiencies. What probably caused these losses and what steps could be taken to prevent these shortages in the future? Indicate whether each of the following business practices strengthens [S] or weakens (W) a company system of internal control. 3 Discouraging employees from taking paid vacations. 4 Using banking facilities as much as possible. 5 Having employees bonded. 6 Conducting surprise audits of cash on hand. 7 Having one person open the mail. 8 Having the receiving department compare goods received with goods ordered.
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