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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Question 38 Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated? Examining purchase returns that appear too low. Examining vendor statements for amounts not reported as purchases. Searching for customer-returned goods that were not reported as returns Reviewing bank transfers recorded as cash received from customers.
Management uses a voucher system to help control and monitor cash payments. Which one or more of the four documents listed below are prepared as part of a voucher system of control? a. Purchase order b. Outstanding check c. Invoice d. Voucher
Which of the following statements are true regarding the control of cash receipts and cash payments? One key to controlling cash payments is to require that no expenditures be made by check; instead, all expenditures should be made from petty cash.
Required: Which internal control(s) would you recommend to prevent the following situations from occurring? Situation a. Authorization of a credit memo for a customer's account (on receivables) when the goods were never actually returned. b. Theft of funds by the cashier, who cashed several checks and did not record their receipt. c. Inventory stolen by receiving dock personnel. The receiving clerk claimed the inventory was sent to the warehouse, but the warehouse clerk did not record properly. d. Writing off a customer's accounts receivable balances as uncollectible in order to conceal the theft of subsequent cash collections. e. Billing customers for the quantity ordered when the quantity shipped was actually less due to back- ordering of some items. Answer
multiple choice question When the petty cash imprest system is established: the bank account is debited. the petty cash account is credited. the bank account is debited and the petty cash account is credited. 4.the bank account is credited and the petty cash account is debited
Which of the following does not show good cash management regarding the controls over cash disbursements? Use a petty cash fund to make only small expenditures. Make all major disbursements by check. Combine the handling of receiving bills, writing checks, and signing checks to one person. Prepare bank reconciliations in a timely manner. All the above shows good cash management controls over cash disbursements. A. В. C. D. E.
For control purposes, any cash overage should be O credited to Other Income account O offset to previous shortages of the cashier O credited to retained earnings account O paid to the cashier who incurred such overage
Which of the following procedures would weaken control over cash receipts that arrive through the mail? Multiple Choice After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent. The cashier deposits the money in the bank and the recordkeeper records the amounts received in the accounting records. For safety, only one person should open the mail, and that person should deposit the cash received in the bank at the end of each month. The bank reconciliation is prepared by a person who does not handle cash or record cash receipts. The employees handling the cash receipts are bonded.
The purpose of bank reconciliationa) None of the answers are correctb) These will include checking the cash/petty cash with the cash bookc) to ensure inventory is ordered when needed and that items are available at the point of saled) to ensure that a company's cash records are correct
As part of a strong internal control system, which of the following accounting duties needsto be separated from cash handling?a. Record keepingb. Filingc. Transaction approvald. Both a and c need to be separated from cash handling.
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.