E8-12 Understanding the Sarbanes-Oxley Act and identifying internal control 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. 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 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 he is confident the amounts are correct. the 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 reason for each answer.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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ning Objective 1 E8-12 Understanding the Sarbanes-Oxley Act and identifying internal control
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.
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 the
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 he
is confident the amounts are correct.
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 reason for each answer.
Transcribed Image Text:ning Objective 1 E8-12 Understanding the Sarbanes-Oxley Act and identifying internal control 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. 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 the 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 he is confident the amounts are correct. 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 reason for each answer.
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