Internal Controls Module 4 Assignment
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Internal Controls Module 4 Assignment
Lucimil Castillo-Gonzalez
Southern New Hampshire University
ACC 201: Financial Accounting
Prof. Jacquelyn Mosely
Feb 4, 2024
1
Role of Internal Controls
The role of internal controls in a business it to ensure all inventory is safeguarded and accounted for when it comes to confirming what was purchased and what was sold. Having great
internal controls can influence the company’s profitability and creditability. For example, if a company is public, which allows individuals to purchase shares, shareholders through income statements should be able to know profit and losses. Having an inventory system in place can demonstrate the amount of assets a company hold which prevents risks like provided false information (Warren, 2019)
. If the company was not public, just having an internal control in place can prevent legal issues for business owners
(Warren, 2019)
. Based on the scenario for this
assignment I would explain different ways to prevent the loss of product.
Recommendations
First recommendation I would apply to prevent the loss of inventory is securing the loading area. In the scenario, it states that the warehouse door including employee access was left open. I would first implement a control producer which in forces the roles of each employee when finishing their shift. For example, the warehouse worker before their shift should ensure that the keys are properly locked in place after closing all doors to rooms that have merchandise and merchandise information; this would help track theft if there is a log in place.
Second recommendation would be to have an inventory check list in place. I would have the morning warehouse count in stock plus the delivery and report the amounts before the shift is
2
over. This will ensure that employee theft is spotted or if the vendor has provided the quantity ordered. (7-2e Warren 2019)
Third recommendation I would recommend is having a supervisor in place to monitor and ensure employees are logging in the inventory properly and validating that keys and doors are locked. With a supervisor to explain and validate the amount of inventory that was recorded day by day, the owner can research when the HD TVs were missing and know if it was vendor issue or employee theft. Having different roles and responsibilities will prevent the loss of goods which in turn demonstrate the accurate revenue and assets in its appropriate financial statements.
(Warren, 2019)
Financial Statement
If I were the business owner and I located the two $400 HD TVs I would demonstrate that the income statement and the balance sheet. I would correct by showing the decrease inventory which would decrease amount of goods sold and increase it to 800 dollars for the worth of both TVs found. In the balance sheet the total assets will decrease and then increase 800
dollars from the worth of both HD TVs.
3
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Works Cited
Warren, C. S. (2019). Coporate Financial Accounting.
Boston: Cengage Learning. Chapter 7.
4
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Related Questions
ning Objective 1
S8-1 Defining internal control
Internal controls are designed to safeguard assets, encourage employees to follow
company policies, promote operational efficiency, and ensure accurate accounting
records.
Requirements
1. Which objective do you think is most important?
2. Which objective do you think the internal controls must accomplish for the busi-
ness to survive? Give your reason.
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Defining internal control
Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate accounting records.
Requirements
1. Which objective do you think is most important?
2. Which objective do you think the internal controls must accomplish for the business to survive? Give your reason.
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Question 9
Big Data techniques implemented in the financial sector include:
fraud detection
O marketing email campaign
O customer relationship management techniques
O inventory analysis
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Question 37 options:
What is the name of the language for electronic communication of business data that allows companies to report financial informaitn in a sturctured, machine-readable format?
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Understanding internal control, components, procedures, and laws
Match the following terms with their definitions.
arrow_forward
> Exercises
E8-12 Understanding the Sarbanes-Oxley Act and identifying internal c
strengths and weaknesses
The following situations suggest a strength or a weakness in internal control.
a. Top managers delegate all internal control procedures to the accounting
department.
E8-14
Learning Objective 1
b. Accounting department staff (or the bookkeeper) orders merchandise and
approves invoices for payment.
c. Cash received over the counter is controlled by the sales clerk, who rings up th
sale and places the cash in the register. The sales clerk matches the total recorded
by the register to each day's cash sales.
d. The employee who signs checks need not examine the payment packet because be
is confident the amounts are correct.
ES
Requirements
1. Define internal control.
2. The system of internal control must be tested by external auditors. What law or
rule requires this testing?
3. Identify each item in the list above as either a strength or a weakness in internal
control, and give your…
arrow_forward
A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure?
Group of answer choices
1.The person in accounts payable should generate the purchase order.
2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received.
3.No changes would be made since the person paying the bills is different from the person ordering the inventory.
4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
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From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of
accounting information and to safeguard assets.
True or False
True
False
G
+
100%
O
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Exercise 6-3 (Algo) Internal control strengths and weaknesses LO C1
Determine whether each procedure described below is an internal control strength or weakness; then identify the internal control principle violated or followed for each procedure.
An employee cannot approve their own request for purchases of inventory.
Several salesclerks share the same cash drawer.
Employees that handle easily transferable assets such as cash are bonded.
The company devotes resources towards keeping accurate accounting records for machinery.
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Cash, Fraud, and Internal Control
Main objectives
To apply an understanding of internal controls.
To an understanding of unethical behavior and how address it.
To apply an understanding of controls dealing with segregation of duties and checks and balances.
To apply the theoretical knowledge in the syllabus to a case study.
To know the company's financial statements in detail.
To apply financial analysis techniques.
To apply the concept of value creation.
Description of the activity and instructions
Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who is in private practice. Dr. Conrad is knowledgeable about office management practices and has segregate the cash receipt duties as follows. Knox opens the mail and prepares a triplicate list of money received. She sends one copy of the list to Patton, the cashier, who deposits the receipts daily in the bank. Diamond, the recordkeeper, receives a copy of the list and posts payments…
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