Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $9,370 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $9,370 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations.   Required: a. Identify the weaknesses in Signet Corporation’s internal control.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $9,370 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $9,370 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations.

 

Required:

aIdentify the weaknesses in Signet Corporation’s internal control.

 

 

 

bExplain several audit procedures that might disclose the fraudulent disbursement.

 

 
 
 
 
 
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