a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Foms and used it to send invoices to Walt Company for business documents that Walt never ordered or re- ceived. Farrell prepared receiving reports that stated that the business documents had been received. Walt's controller compared the receiving reports to the invoices and paid cach one. b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the bank's closing hours to deposit them in the night depository slot. A creative thief had placed a sign on the slot saying it was out of order and all deposits should be placed in a metal canister placed next to the building. Walt's employee placed the deposit in the canister and left. Employ- ees from two other companies did the same thing. Later that night, the thief returned and stole the deposits from the canister. (This is an actual case.) c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier pocketed cash receipts and destroyed all copies of the related sales invoices. Required For each situation, describe any violations of good internal control procedures and identify the steps that you would take to prevent each situation.
a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Foms and used it to send invoices to Walt Company for business documents that Walt never ordered or re- ceived. Farrell prepared receiving reports that stated that the business documents had been received. Walt's controller compared the receiving reports to the invoices and paid cach one. b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the bank's closing hours to deposit them in the night depository slot. A creative thief had placed a sign on the slot saying it was out of order and all deposits should be placed in a metal canister placed next to the building. Walt's employee placed the deposit in the canister and left. Employ- ees from two other companies did the same thing. Later that night, the thief returned and stole the deposits from the canister. (This is an actual case.) c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier pocketed cash receipts and destroyed all copies of the related sales invoices. Required For each situation, describe any violations of good internal control procedures and identify the steps that you would take to prevent each situation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please solve all the questions with a detailed explanation. Each sub-division should contain two parts which are answer and explanation.
Transcribed Image Text:P7-1B. Internal Control Walt Company encountered the following situations:
LO2, 4
a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Forms
and used it to send invoices to Walt Company for business documents that Walt never ordered or re-
ceived. Farrell prepared receiving reports that stated that the business documents had been received.
Walt's controller compared the receiving reports to the invoices and paid each one.
b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the
bank's closing hours to deposit them in the night depository slot. A creative thief had placed a
sign on the slot saying it was out of order and all deposits should be placed in a metal canister
placed next to the building. Walt's employee placed the deposit in the canister and left. Employ-
ees from two other companies did the same thing. Later that night, the thief returned and stole the
deposits from the canister. (This is an actual case.)
c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier
pocketed cash receipts and destroyed all copies of the related sales invoices.
Required
For each situation, describe any violations of good internal control procedures and identify the steps
that you would take to prevent each situation.
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