Quality Electronics Company is a distributor of microcomputers and related electronic equipment. The company has grown very rapidly. It is located in a large building near Chicago, Illinois. Jack Flanigan, the president of Quality, has hired you to perform an internal control review of the company. You conduct interviews of key employees, tour the operations, and observe various company functions. You discover the following: Quality has not changed its ordering procedures since it was formed eight years ago. Anyone in the company can prepare a purchase order and send it to the vendor without getting any managerial approval. When the invoice arrives from the vendor, it is compared only to the purchase order before authorizing payment. Quality does not have an organization chart. In fact, employees are encouraged to work on their own, without supervision. Flanigan believes that this approach increases creativity. Business documents have been carefully designed by the controller. When the printer prints the documents, no control numbers are printed on them. Instead, employees using a form write the next sequential number on the form. The controller believes that this approach ensures that a proper sequencing of numbers will be maintained. No budgets are prepared for the company. All doors to the building remain unlocked from 7:00 a.m. to 11:00 p.m. Employees normally work from 7:30 a.m. to 5:00 p.m. A private security firm drives to the building to unlock it each morning and lock it each night. The security firm’s employee leaves immediately after unlocking or locking. The company does not use time clocks or employee badges. Flanigan believes that audits (either external or internal) are a waste of time. He has resisted the bank president’s urging to hire a CPA firm to conduct an audit. Questions to be Answered: Analyze the findings listed above and list all the internal control weaknesses that you can identify. For each weakness, describe one or more internal controls that Quality should install to overcome the weakness.

Quality Electronics Company is a distributor of microcomputers and related electronic equipment. The company has grown very rapidly. It is located in a large building near Chicago, Illinois. Jack Flanigan, the president of Quality, has hired you to perform an internal control review of the company. You conduct interviews of key employees, tour the operations, and observe various company functions. You discover the following: Quality has not changed its ordering procedures since it was formed eight years ago. Anyone in the company can prepare a purchase order and send it to the vendor without getting any managerial approval. When the invoice arrives from the vendor, it is compared only to the purchase order before authorizing payment. Quality does not have an organization chart. In fact, employees are encouraged to work on their own, without supervision. Flanigan believes that this approach increases creativity. Business documents have been carefully designed by the controller. When the printer prints the documents, no control numbers are printed on them. Instead, employees using a form write the next sequential number on the form. The controller believes that this approach ensures that a proper sequencing of numbers will be maintained. No budgets are prepared for the company. All doors to the building remain unlocked from 7:00 a.m. to 11:00 p.m. Employees normally work from 7:30 a.m. to 5:00 p.m. A private security firm drives to the building to unlock it each morning and lock it each night. The security firm’s employee leaves immediately after unlocking or locking. The company does not use time clocks or employee badges. Flanigan believes that audits (either external or internal) are a waste of time. He has resisted the bank president’s urging to hire a CPA firm to conduct an audit. Questions to be Answered: Analyze the findings listed above and list all the internal control weaknesses that you can identify. For each weakness, describe one or more internal controls that Quality should install to overcome the weakness.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Chp#7 (Note: . Provide a detailed 4-5 sentence explanation)

Issue: Quality Electronics Company is a distributor of microcomputers and related electronic equipment. The company has grown very rapidly. It is located in a large building near Chicago, Illinois. Jack Flanigan, the president of Quality, has hired you to perform an internal control review of the company. You conduct interviews of key employees, tour the operations, and observe various company functions. You discover the following:

Quality has not changed its ordering procedures since it was formed eight years ago. Anyone in the company can prepare a purchase order and send it to the vendor without getting any managerial approval. When the invoice arrives from the vendor, it is compared only to the purchase order before authorizing payment.
Quality does not have an organization chart. In fact, employees are encouraged to work on their own, without supervision. Flanigan believes that this approach increases creativity.
Business documents have been carefully designed by the controller. When the printer prints the documents, no control numbers are printed on them. Instead, employees using a form write the next sequential number on the form. The controller believes that this approach ensures that a proper sequencing of numbers will be maintained.
No budgets are prepared for the company.
All doors to the building remain unlocked from 7:00 a.m. to 11:00 p.m. Employees normally work from 7:30 a.m. to 5:00 p.m. A private security firm drives to the building to unlock it each morning and lock it each night. The security firm’s employee leaves immediately after unlocking or locking. The company does not use time clocks or employee badges.
Flanigan believes that audits (either external or internal) are a waste of time. He has resisted the bank president’s urging to hire a CPA firm to conduct an audit.

Questions to be Answered:

Analyze the findings listed above and list all the internal control weaknesses that you can identify.
For each weakness, describe one or more internal controls that Quality should install to overcome the weakness.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.