Explain potential misstatements - cash receipt and the description of of misstatements. The Recording fictitious cash receipts, Failure to record receipts from cash sales, Failure to record cash from collection of accounts receivable and Early (late) recognition of cash receipts "cutoff problems" Failure to record cash fromcollection of accounts receivableEarly (late) recognition of cash-"cutoff problems"receiptsFraud:●Internal Control Affecting Assets●●A cashier embezzles cashpayments by customers onreceivables, withoutrecording the receipts in thecustomers' accounts.A bookkeeper accidentallywho has access to cashreceipts embezzles cashcollected from customersand writes off the relatedreceivables.Error:• A bookkeeper accidentallyfails to record payment ona receivable.Fraud:● Holding the cash receiptsjournal open to record nextyear's cash receipts ashaving occurred in thisyear.Error:● Recording cash receiptsbased on bad informationabout date of receipt.247Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Lack of segregation ofduties between personnelwho have access to cashreceipts and those whomake entries into theaccounts receivablerecords.Inadequate reconciliationsof subsidiary records ofaccounts receivable withthe general ledger controlaccount.Ineffective board ofdirectors, audit committee,or internal audit function;"tone at the top" notconductive to ethicalconduct; undue pressure toshow improved financialposition.Failure to list and depositcash receipts on a timelybasis.●● 246Chapter 164. Record cash receipts on a timely basis.5.Encourage customers to obtain receipts and observe cash register totals.6. Deposit cash receipts daily.7.Make all disbursements by check or electronic funds transfer, with theexception of small expenditures from petty cash.8.Have monthly bank reconciliation prepared by employees notresponsible for the issuance of checks or custody of cash. The completedreconciliation should be reviewed promptly by an appropriate official.9. Monitor cash receipts and disbursements by comparing recordedamounts to forecasted amounts and investigating variances fromforecasted amounts.Potential Misstatements - Cash ReceiptsDescription of MisstatementExamplesInternal Control Weakness orFactors that Increase theRisk of the MisstatementRecording fictitious cash receiptsOverstating cash receiptson the books bytransferring cash betweenbank accounts withoutappropriate recording ofthe transfer to cover up anembezzlement of cash.Lack of segregation ofduties of the functions ofaccess to cash and recordkeeping; no effectivereview of bankreconciliations.Failure to record receipts fromcash salesA cashier fails to ring upand record cash sales andembezzles the cash.Inadequate supervision ofcashiers; failure toencourage customers toobtain cash receipts.Inadequate controls forA bookkeeper accidentallyomits the recording of thereceipts from one cashregister for the day.reconciling cash regisiertapes and accountingrecords; inadequatecontrols for reconcilingbank accounts.Froud:●Fraud:●Error:●●

Frauds and errors with cash possible in many ways by the employees dealing with it and is a highly…

Explain potential misstatements - cash receipt and the description of of misstatements. The Recording fictitious cash receipts, Failure to record receipts from cash sales, Failure to record cash from collection of accounts receivable and Early (late) recognition of cash receipts "cutoff problems"

Explain potential misstatements - cash receipt and the description of of misstatements. The Recording fictitious cash receipts, Failure to record receipts from cash sales, Failure to record cash from collection of accounts receivable and Early (late) recognition of cash receipts "cutoff problems"

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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A common audit procedure to verify the existence assertion of cash account balances is: a. examining evidence over the authorization of cash disbursement b. examining evidence of the separation of duties between the receipts of cash payments and posting to the accounts receivable subsidiary records c. Standard Bank Confirmation form d. none of these
In testing controls over cash disbursements, an auditor most likely would determine that the person who signs the check also: A. Approves the voucher for payment. C B. C. D. Stamps, perforates or otherwise cancels supporting documents. Returns the checks to accounts payable. Is denied access to the supporting documents.
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
Internal controls associated with the purchases and cash disbursements cycle include: A Separation of duties. B Adequate documentation. C Both separation of duties and adequate documentation. D Neither separation of duties nor adequate documentation.
The Cash Over and Short account: Multiple Choice Is used to record the income effects of cash overages and cash shortages. Is not necessary in a computerized accounting system. Can never have a credit balance. Is used when the cash account reports a credit balance. Can never have a debit balance.