 In this presentation, we're going to take a look at some multiple-choice questions related to cash and internal controls. First question, which is not a limitation on internal controls? A. Human error. Human error triumphing over machines. B. Fraud. C. Cost-benefit principle. C. R. D. Collusion. And E. Establishing Responsibility. Responsibility. Time. We will read through this and then see if we can cross out some of the answers with the process of elimination, which is not a limitation on internal controls. Now internal controls are those procedures that are trying to help us achieve certain goals like safeguarding assets, being in compliance with policies and procedures, with being in compliance with laws, with trying to make accurate record keeping. So what types of things are going to be limiting to that? Now any internal control has problems with it. There's no perfect system. That's why whenever we say something is going to be guaranteed by the outcome of the internal control, it's not true because there is no there is no guarantee. So we're going to say if we go through here, which is not a limitation on internal controls, human error, well human error is probably going to still be a limitation. We may reduce it with good internal controls, the problem of human error, but human error will still be a problem. So it's not going to be human error. B says fraud. Now again, we could reduce the likelihood of fraud, but fraud could still take place. If someone has an intent to commit fraud, it's not going to eliminate fraud. It might help us to catch it or stop it, but it's still going to be a problem in the system. So I think that's a limitation. Cost benefit principle. Now that's a little, you know, that's a principle of a cost benefits. I'm not totally sure. I'm going to keep that for now. D says collusion. And when you think about limitations for internal controls, that's like the first one you should think about, meaning it's kind of a bad word. It really means two people are getting, well in terms of internal controls, it's a bad word. It means that two people are getting together. And to circumvent the system, one of the major controls typically being to have a separation of duties. So collusion could be a limitation to just about any internal control system. E says establishing responsibility. And again, that doesn't sound like a weakness really. So I'm going to leave it with C and E. We'll go through this one more time, which is not a limitation of internal controls, either C cost benefit analysis or E establishing responsibility. Now of these two, I would think that C we could think of as a limitation, a limitation in the internal controls in that we're always going to have a cost benefit analysis, we're never going to get the internal controls up to the point where we have perfect assurance about anything. Because if we were to do so, it would cost too much. So we got to find some cost benefit analysis, which is kind of a problem with the internal controls there. So I think that is kind of a weakness in that we're going to apply a cost benefit analysis. And there's always there's never a complete call. We can't just spend anything to have the internal. So that's going to be establishing responsibilities is one of the procedures of internal controls. I don't think it's a weakness really, it's going to be one of the things we do in order to help the internal control system. So I think the question and answer then would be, which is not a limitation of internal controls, E establishing responsibility. Next question, which internal control principle is violated by sharing the one cash register, A, establishing responsibility, B, maintain adequate records, C, safeguard assets, D, trace employees, E, apply technological controls. Once again, we'll read through the process and see if we can cross them out with the process of elimination, which internal control principle is violated by sharing the one cash register, A, establishing responsibility. That could be it because we're not, you know, we got two people on the one register and we don't know who's responsible for the cash maintenance of that register. If there's a problem with it, you know, who's responsible for it. So we'll keep that one for now, B, maintain adequate records. And you could kind of think that because it's not, we're not being able to keep the records per person, but it should still, the register should still be recording the records for the sales. So I don't think it's going to be that. C says safeguard assets. And again, you can kind of think about that as well. There's two people involved, maybe there's less safeguarding, I'll keep it for now. D, track employees. And that's, you know, we're not able to track employees as well. I'll keep that for now. And E says apply technological controls. Now we are using a register as part of our controls, but I'm not going to, I don't believe it's going to be technological controls because we are using the register. So I'm going to leave it at a C and D either establish responsibility, safeguard assets or track employees. So if we read through it one more time, which internal control principle is violated by sharing the one cash register, one established responsibility, that does seem a problem. We're not, we don't know who's responsible for that cash register and the cash in it. And that's a really one is a good example of just how this problem can be a problem because obviously if the cash drawer, if there's too many people responsible for one cash drawer, then we have less worry if there's a cash problem because we know that it's not our responsibility alone. And if anybody's blamed, they got to blame some kind of group, which means that no one's going to be responsible probably. So that seems pretty good. Safeguarding the assets. Now, because we don't establish the responsibility, the assets don't seem to be as safeguarded because because the lack of responsibility is not going to safeguard the assets. So I think it's not this one because that's kind of a secondary result. The cash register itself is safeguarding the asset. The real weakness is that we have not established responsibility and that could lead to theft or problems or lack of care. Track employees. Now that's technically kind of true because we're not able to track the employees like we should. But of the two A and D track employees is not really internal control principle. It's kind of something it's not at least it's not worded as typically the principles are. Whereas established responsibility clearly is. So I don't think track employees is going to be the one. It's going to be a and so the question and answer then will be which internal control principle is violated by sharing the one cash register a established responsibility. Next question. The impact of technology on internal controls includes A. Eliminate fraud B. Elimination of the need for review C. Elimination of the need to count cash D. Elimination of separation of duties and E. Reduced errors. Once again if we read through this we're going to use the process of elimination. The impact of technology on internal controls includes A. Eliminate frauds. No. Again the eliminate really kind of takes it could reduce the likelihood of frauds. And so that one word is really taking most of these out. So I think that eliminates that one. B. Eliminate the need for a review. Now if we're talking about a review within the internal control system we that would be part of the internal controls and if we're talking about an external review it doesn't eliminate the need for it. So it might reduce it again or reduce the type of procedures. So but the elimination really takes that one out. Elimination of the need to count cash. Now obviously even within a technology technology system that's going to record the cash information how much is going in and out we still would need to count the cash as part of the control procedures. So that's not it. Elimination of separation of duties and clearly separation of duties is still going to be something we put in place with technology. We still want to have separation of duties so that's not it. Reduce errors. And notice again the non use of the elimination word. If it said eliminate errors that would not be it. But by the process of elimination it's got to be E. And reduce errors seems reasonable. So let's read through that one more time. The impact of technology on internal controls includes reduced errors. So as we use technologies we will hopefully reduce errors that will be in place especially errors related to putting things in place that don't match up like Deb it's not equal in the credits as we enter information into a computerized system.