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For each of the internal controls: a. Describe the risks that the above-mentioned internal control is designed to reduce or prevent.

For each of the internal controls: a. Describe the risks that the above-mentioned internal control is designed to reduce or prevent.

FINANCIAL ACCOUNTING
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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Please help me do question 1a
Question 1: The Jack & John Company has the following internal controls related to inventory: 1. In inventory storage locations, only authorized inventory and warehousing staff are permitted. 2. All inventory items are stored in warehousing facilities that are separated from the equipment and supplies storage areas. 3. The inventory purchasing system only allows purchases from preapproved vendors. 4.. Each product contains microchips, and when inventory items are removed from the warehouse for shipping, radio-frequency signals indicate a reduction in inventory in the perpetual inventory system. 5. Inventory accounting staff select samples of inventory products from the perpetual inventory system on a weekly basis and check that the inventory is on hand in the warehouse and that the quantities listed in the listing are exact. 6. On a daily basis, the perpetual inventory system subtotals the quantity of inventory in the system and communicates with the general ledger system to check that quantities agree. 7. In Jack & John Company, all inventory held on consignment is kept in a separate warehouse space. For each of the internal controls: a. Describe the risks that the above-mentioned internal control is designed to reduce or prevent. b. Design a test of control to determine if the control is implemented effectively.
Transcribed Image Text:Question 1: The Jack & John Company has the following internal controls related to inventory: 1. In inventory storage locations, only authorized inventory and warehousing staff are permitted. 2. All inventory items are stored in warehousing facilities that are separated from the equipment and supplies storage areas. 3. The inventory purchasing system only allows purchases from preapproved vendors. 4.. Each product contains microchips, and when inventory items are removed from the warehouse for shipping, radio-frequency signals indicate a reduction in inventory in the perpetual inventory system. 5. Inventory accounting staff select samples of inventory products from the perpetual inventory system on a weekly basis and check that the inventory is on hand in the warehouse and that the quantities listed in the listing are exact. 6. On a daily basis, the perpetual inventory system subtotals the quantity of inventory in the system and communicates with the general ledger system to check that quantities agree. 7. In Jack & John Company, all inventory held on consignment is kept in a separate warehouse space. For each of the internal controls: a. Describe the risks that the above-mentioned internal control is designed to reduce or prevent. b. Design a test of control to determine if the control is implemented effectively.
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