Question

Douglas company has the following,

1 a pre-numbered shipping document is used for each shipment to customers.

2. The employee who writes checks cannot make entries in the general ledger.

3. An internal auditor reconciles the bank statement each month.

4. The company stores inventory in a room that is monitored by cameras

5. The manger is required to authorize purchases before they are made by employees,

For each item, identify the internal control principle that is being followed.

Answer 1

S.No.	Description	Internal Control	Explanation
1	A pre-numbered shipping document is used for each shipment to customers.	Documentation procedures	Ensuring control over physical documents
2	The employee who writes checks cannot make entries in the general ledger	Segregation of Duties	Ensures that same person is not assigned multiple tasks.
3	An internal auditor reconciles the bank statement each month.	Independent Internal Verification	An independent party checking the company records to minimize financial risk.
4	The company stores inventory in a room that is monitored by cameras	Physical Controls	Security measures to safeguard physical assets
5	The manger is required to authorize purchases before they are made by employees	Establishment of responsibility	Assigning a particular task to a particular employee