е 1 E9-15 Identifying and correcting internal control weakness Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, .... the office manager, is designing the internal control system. Re gal proposes the follow ing procedures for credit checks on new customers, sales on account, cash collections and write-offs of uncollectible receivables: The credit department runs a credit check on all customers who apply for credit When an account proves uncollectible, the credit department authorizes the write off of the accounts receivable. Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts. The controller compares the daily deposit slip to the total amount posted to customer accounts. Both amounts must agree. Recall the components of internal control. Identify the internal control weakness in this situation, and propose a way to correct it.

е 1 E9-15 Identifying and correcting internal control weakness Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, .... the office manager, is designing the internal control system. Re gal proposes the follow ing procedures for credit checks on new customers, sales on account, cash collections and write-offs of uncollectible receivables: The credit department runs a credit check on all customers who apply for credit When an account proves uncollectible, the credit department authorizes the write off of the accounts receivable. Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts. The controller compares the daily deposit slip to the total amount posted to customer accounts. Both amounts must agree. Recall the components of internal control. Identify the internal control weakness in this situation, and propose a way to correct it.

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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Identifying and correcting internal control weakness Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, the office manager, is designing the internal control system. Regal proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write-offs of uncollectible receivables: The credit department runs a credit check on all customers who apply for credit. When an account proves uncollectible, the credit department authorizes the write- off of the accounts receivable. Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts. The controller compares the daily deposit slip to the total amount posted to customer accounts.…
Accounting is an information and measurement system that does all of the following except. f2 W Multiple Choice O O BH # Records business activities. Identifies business activities. 3 Communicates business activities. Eliminates the need for interpreting financial data. Helps people make better decisions. f3 E S f4 63 R 15 % 5 8 f6 T A 19 8 1- ( T
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Exercise 7-06 a The following control procedures are used in Bunny’s Boutique Shoppe for cash disbursements.(a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. Procedure Weakness Principle Violated 1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. select a weakness The bank reconciliation is not independently preparedUnauthorized employees making purchasesFiling does not prevent a bill from being paid more than onceThe approval and payment of bills is done by the same individualUse of cash instead of checks; no prenumbered invoicesChecks are not stored in a secure area select a principle violated Physical controlsSegregation of dutiesDocumentation proceduresIndependent internal verificationEstablishment of responsibilityHuman resource controls 2. The store manager personally approves all payments before she signs and…
E8B. ACCOUNTING CONNECTION Developing a convenient means of reimbursing sales representatives with cash for their incidental expenses, such as for meals and supplies, is a problem many companies face. Under one company's plan, the sales representatives submit the receipts for reimbursement to the petty cash custodian. The representative then receives cash from the petty cash fund. What is the weak point in this system? What fundamental principle of internal con- trol is being ignored? What improvement in the procedure can you suggest?
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Question 32 Which of the following is LEAST indicative of fraudulent activity. Numerous cash refunds made to different people at the same PO box. Several credit memos cannot be located to support reductions in customers' balances. Bank reconciliation has no outstanding checks or deposits in transit older than fifteen days. Three people were absent the day the auditors handed out paychecks and these checks were not picked up until four weeks later.
Identifying internal control weakness in cash receipts Seawind Productions makes all sales on credit. Cash receipts arrive by mail. Justin Broadway, the mailroom clerk, opens envelopes and separates the checks from the accompanying remittance advice. Broadway forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Broadway sends the remittance advice, which show cash received, to the accounting department for entry in the accounts. Broadway’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the customer’s account receivable.) When Broadway receives a customer check for $600 less than a $30 allowance, he records the sales allowance and forwards the document to the accounting department. Requirements Identify the internal control weakness in this situation. Who should record sales allowances? What is the amount that should be shown in the ledger for cash receipts?<