APPENDIX -A

.Internal Controls and RiskReview the following description of the purchasing and AP procedures for a company and answer the questions at the end.The purchasing agent receives an inventory status report on his computer terminal from the inventory control application, which identifies the items that need to be reordered. The agent selects the suppliers and enters this information into the computer terminal to create a digital purchase order. He then prints and sends a copy of the PO to the supplier.When the goods are received directly into the warehouse, the warehouse manager counts and inspects them. The manager then creates a digital receiving report and updates the inventory subsidiary ledger from the warehouse terminal.A few days later, the supplier sends an invoice to the AP clerk who reconciles it with the digital copy of the receiving report. From her computer terminal, the clerk records the purchase in the purchases journal and records the liability by adding a record to the AP…

Topic is about The expenditure cycle part I: purchases and cash disbursements procedures

INFORMATION SYSTEM CATEGORIZATIONClassify the following as tasks performed by either:TPS—transaction processing SystemFRS—financial reporting SystemMRS—management reporting Systema. Preparation of balance sheetb. Capture customer sales orderc. Preparation of variance reportsd. Preparation of budgetse. Purchase order preparationf. Summary of inventory purchases by vendorg. Preparation of comparative sales report by divisionh. Preparation of cash disbursements to vendorsi. Annual report preparationj. Customer billing processk. Cost-volume-profit analysis

A retail company is required to perform a stock count to identify shortages at least once per month. What type of control is this? a. Detective control b. Preventive control c. Corrective control d. Directive control

Internal Control Terminology A list of terms and another list of definitions and examples are presented below. Match the directly related definition or example with the each term. Required:     Accounting controls Adequate documents and records Checks on recorded amounts Effective personnel policies   Company policy requires receiving reports to be made for all deliveries by suppliers. Cash deposits are reconciled with cash register records at the end of every day. These are policies and procedures that govern the identification, measurement, recording, and communication of economic information. Every new employee is required to spend two days in training courses to learn company policies.

RISK ANALYSIS AND INTERNAL CONTROL The following describes the purchases and cash disbursements procedures for a lawn and garden supply wholesaler that uses a central computer system with distributed terminals in departments. The inventory control clerk visually reviews inventory levels from his computer terminal to identify items that need to be ordered. He then prints and sends a hard copy purchase requisition for the needed items to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds a digital record to the purchase order file from his terminal in the purchasing department. The clerk then prints a hard copy of the purchase order and mails it to the vendor. Finally, the purchasing agent destroys the purchase requisition, which it is no longer needed since the relevant details are on the PO. When the materials arrive at the receiving department a receiving clerk prints a copy of the purchase order from his terminal and reconciles it to the…

Payable ICQ Items: Assertions, Tests of Controls, and Possible Errors or Frauds. Following is a selection of items from internal control questionnaires.1. Are purchase orders above a certain level approved by an officer?2. Are the quantity and quality of goods received determined at the time of receipt by receiving personnel independent of the purchasing department?3. Are vendors’ invoices matched against purchase orders and receiving reports before a liability is recorded?4. Are journal entries authorized at appropriate levels?Required:For each preceding item:a. Identify the management assertion to which it applies.b. Specify one test of controls auditors could use to determine whether the control was operating effectively.c. Give an example of an error or fraud that could occur if the control were absent or ineffective.d. Write a substantive procedure that could find errors or frauds that could result from the absence or ineffectiveness of the control items.

E2B. Some conditions for internal control follow. a. Transactions are executed in accordance with management's general or specific authorization. b. Transactions are recorded as necessary to permit preparation of financial statements and maintain accountability for assets. c. Access to assets is permitted only as allowed by management. d. At reasonable intervals, the records of assets are compared with the existing assets. David Pinto, who operates a small grocery store, has established the following policies with regard to the checkout cashiers: 1. Each cashier has his or her own cash drawer, to which no one else has access. 2. Cashiers may accept checks for purchases under $50 with proper identification. For checks over $50, they must receive approval from Pinto. 3. Every sale must be rung up on the cash register and a receipt given to the customer. Each sale is recorded on a tape inside the cash register. 4. At the end of each day, Pinto counts the cash in the drawer and compares it…

3) Which of the following audit procedures is a test of control? a. Management providing written instruction to all employees and supervising the monthly inventory stocktake. b. Observing employee compliance with stocktake procedures. c. Picking a sample of goods received notes and ensuring the correct date is recorded in the purchase’s ledger. d. Estimating total sales for a specific product line for the year and comparing actual sales.

Some conditions for internal control follow.a. Transactions are executed in accordance with management’s general or specific authorization.b. Transactions are recorded as necessary to permit preparation of financial statements and maintain accountability for assets.c. Access to assets is permitted only as allowed by management.d. At reasonable intervals, the records of assets are compared with the existing assets. David Pinto, who operates a small grocery store, has established the following policieswith regard to the checkout cashiers:1. Each cashier has his or her own cash drawer, to which no one else has access.2. Cashiers may accept checks for purchases under $50 with proper identification. For checks over $50, they must receive approval from Pinto.3. Every sale must be rung up on the cash register and a receipt given to the customer. Each sale is recorded on a tape inside the cash register.4. At the end of each day, Pinto counts the cash in the drawer and compares it with the…

. RISK ANALYSIS AND INTERNALCONTROLThe following describes the purchases and cash disbursements procedures for a lawn and garden supplywholesaler that uses a central computer system withdistributed terminals in departments.The inventory control clerk visually reviewsinventory levels from his computer terminal to identify items that need to be ordered. He then prints andsends a hard-copy purchase requisition for the neededitems to the purchasing agent. Based on the requisition, the purchasing agent selects a vendor and adds adigital record to the purchase order file from his terminal in the purchasing department. The clerk thenprints a hard copy of the purchase order and mails itto the vendor. Finally, the purchasing agent destroysthe purchase requisition, which is no longer neededsince the relevant details are on the PO.When the materials arrive at the receiving department a receiving clerk prints a copy of the purchaseorder from his terminal and reconciles it to the packing slip. The…

Which of the following is an internal control measure regarding purchases made by a company during a fiscal year? a. The person authorizing purchase orders is the person filling purchase requisitions. b. Payment to creditors is authorized only after the purchase invoice data is verified against the receiving report and purchase order. c. The person authorizing payment is the person writing the payment checks. d. Payment to creditors is authorized only after the purchase invoice data is verified against the inventory levels existing on the ☐ date of the payment.

Figure 2.1 presents the business activities of purchasing department, receiving department and account payable department of ABC Limited. This might be important to note that this is a newly configured expenditure cycle using the basic technology.       Figure 2.1. Expenditure Cycle of ABC Limited. Required: Which of the above functions must be performed by the cash disbursement department? Based on the above information, discuss the uncontrolled risks associated with the system as currently configured? And describe the controls that need to be implemented into the system to mitigate the risks in the given scenario.

A. Occurrence B. Completeness C. Rights and obligationsD. Allocation or valuationE. ClassificationF. ExistenceG. CutoffH. AccuracyI. UnderstandabilityFor each of the following control activities, identify the management assertion that best applies by placing the correct letter in the blank space below.___ 1. Match shipping documents with sales invoices before a sale is recorded.___ 2. Balance total of individual customers' receivables with the control account.___ 3. Sales manager approves taking discounts.___ 4. Computer check for billing the quantity shipped, list price, and total.___ 5. Account for numerical sequence of pre-numbered shipping documents.