Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of th best internal control principle that is related to the problem described. Internal Control Principles A. Establishment of responsibility B. Segregation of duties C. Physical control devices D. Documentation procedures E. Independent internal verification F. Human resource controls 1.The same person opens incoming mail and records the cash receipts. 2. Three people handle cash sales from the same cash register drawer. 3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out o the store without paying for the merchandise. 4. The person who is authorized to sign checks approves purchase orders for payment 5. Some cash payments are not recorded because checks are not pre-numbered. 6. Cash shortages are not discovered because there are no daily cash counts by supervisors. 7. The treasurer of the company has not taken a vacation for over 20 years,

Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of th best internal control principle that is related to the problem described. Internal Control Principles A. Establishment of responsibility B. Segregation of duties C. Physical control devices D. Documentation procedures E. Independent internal verification F. Human resource controls 1.The same person opens incoming mail and records the cash receipts. 2. Three people handle cash sales from the same cash register drawer. 3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out o the store without paying for the merchandise. 4. The person who is authorized to sign checks approves purchase orders for payment 5. Some cash payments are not recorded because checks are not pre-numbered. 6. Cash shortages are not discovered because there are no daily cash counts by supervisors. 7. The treasurer of the company has not taken a vacation for over 20 years,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following questions are listed on the internal control questionnaire for ABC Corporation:i. Are cash receipts deposited intact daily?ii. Does an employee verify and approve cash discounts taken?Required: For each of the above questions, identifya. the financial statement assertion to which the control relates.
Which of the following reflects a weak internal control system? Please explain with full explanation. a. All employees are well supervised. b. A single employee is responsible for comparing a receiving report to an invoice. c. All employees must take their vacations. d. A single employee is responsible for collecting and recording cash.
Which of the following is not a reason why paying by check is an important internal control? A. The check must be signed by an authorized official. B. The check provides a record of the payment. ○ C. Before signing the check, the purchasing agent reviews the invoice or other evidence supporting the payment. OD. All of the above statements are correct.
An accounting manager, who has full access to a Company’s accounting system also has access to the bank account and is able to send cash payments without supervision. What is an internal control that should be implemented to reduce the risk of theft or fraud in this company?
Assess the following statement as true or false. Enter T for true or F for false. 1. 2. 3. 4. Bank reconciliation is one of documentation procedure control. A cash budget contributes to more effective internal control. of segregation of duties. 5. to apply. Allow only one check signer has access to cash recording is an example The assumption of inventory method (i.e. FIFO etc.) may not match the physical flow of goods. Technology has make the perpetual inventory more popular and easier
List at least 5 control measures per principle of control activities which an organization may implement to establish internal control procedures. What internal control features exist in a petty cash fund?
Whole Fruits Market took the following actions to improve internal controls. For each of the following actions, select the internal control principle the company followed. a. Personal ID cards are used to limit access to only authorized employees. b. The company divides responsibility for a transaction between multiple departments. c. Each cashier is designated a specific cash drawer and is solely responsible for cash in that drawer. d. Purchased an insurance (bonding) policy against losses from theft by a cashier. e. To ensure equipment theft does not go undetected, detailed accounting records are kept. f. The company's internal auditors frequently assess the performance of internal controls.
Some strategies in management can use to implement controls to ensure the integrity and existence of the client's cash balances. Reconciling cash can be a great control in most cases since receipts tie to deposits so it's accurate and cash exists since it hits the bank account. Now reconciling on a daily basis is important as well but would you be able to negotiate the cash box if the employee was using a lapping fraud to steal money? If they took $100 of cash and issued a manual receipt to the customer then used the next $100 to come in to clear the AR from the first customer on the cash receipt system, wouldn't I still reconcile? What could I do as a manager to prevent this type of fraud from occurring?
Match each of the following cash payment activities to the internal control principle to which itbest relates. Enter the appropriate letter in the space provided.1. The business manager has the only key to thecheck-signing equipment.2. The purchasing manager orders all goods andservices for the business.3. A bank reconciliation is prepared monthly.4. Prenumbered checks are used for all payments.5. The company asks suppliers to deliver their merchandise to the warehouse but mail their invoicesto the accounting department.A. Establish responsibilityB. Segregate dutiesC. Restrict accessD. Document proceduresE. Independently verify