Required: (a) Identify the internal controls over the fixed assets at HMD, based on the following controls: (1) Authorization; (ii) Accurate transaction; (iii) Recorded transaction; and (iv) Reasonableness of recorded transactions. b) Determine the adequate controls that may exist to safeguard the assets.
Required: (a) Identify the internal controls over the fixed assets at HMD, based on the following controls: (1) Authorization; (ii) Accurate transaction; (iii) Recorded transaction; and (iv) Reasonableness of recorded transactions. b) Determine the adequate controls that may exist to safeguard the assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![HMD Corporarion operates a high end manufacturing facility. The capital intenste
nature of the corporation's operations makes internal control ver the aquivition and the
use of fixed wsets important management objectives.
At the beginming of every financial vear. UMD erepares a fised aset budget that would
indicate the planning on their capital expenditure. To prepare this, managers from cach
department would request capital expenditure from the senior management. This requires
them to complete a fixed asset requisition form, which must be approved by the senior
management team. HMD has established PPE (property, plant and equipment) guidance
and policies that will determine whether the fixed asset requisition is to be considered as
capital expenditure or revenue expenditure.
The management committee will meet each month to review the budget reports. Among
other things, the committee will also comnare actual outcome incurred by the managers
to their forecasted figures; and to authorize any additional expenditure needed. The
committee also reviews and approves any request for asset disposal.
The entire relevant document pertaining to the fixed assets request will be forwarded to the
accounting department, including copies of vouchers used to document any department's
requests for their asset disposal. As any other accounting department, they are responsible
to maintain all the company accounts including the fixed assets.
Among the policies of HMD, when an asset is acquired, it will be tagged for identification and
other necessary documentation. This important documentation is needed for subsequent
measurement and updating the fixed asset ledger. Depreciation will be estimated at year
end and posted to the general ledger, together with physical inventories of fixed assets.
Required:
(a) Identify the internal controls over the fixed assets at HMD, based on the following
controls:
(i) Authorization;
(ii) Accurate transaction;
(iii) Recorded transaction; and
(iv) Reasonableness of recorded transactions.
(b) Determine the adequate controls that may exist to safeguard the assets.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6e7be027-763e-4853-9f24-7bd7690d3fe5%2F1782257b-0665-4f9f-af3c-aa52be5c4d6e%2Fyrot0hv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:HMD Corporarion operates a high end manufacturing facility. The capital intenste
nature of the corporation's operations makes internal control ver the aquivition and the
use of fixed wsets important management objectives.
At the beginming of every financial vear. UMD erepares a fised aset budget that would
indicate the planning on their capital expenditure. To prepare this, managers from cach
department would request capital expenditure from the senior management. This requires
them to complete a fixed asset requisition form, which must be approved by the senior
management team. HMD has established PPE (property, plant and equipment) guidance
and policies that will determine whether the fixed asset requisition is to be considered as
capital expenditure or revenue expenditure.
The management committee will meet each month to review the budget reports. Among
other things, the committee will also comnare actual outcome incurred by the managers
to their forecasted figures; and to authorize any additional expenditure needed. The
committee also reviews and approves any request for asset disposal.
The entire relevant document pertaining to the fixed assets request will be forwarded to the
accounting department, including copies of vouchers used to document any department's
requests for their asset disposal. As any other accounting department, they are responsible
to maintain all the company accounts including the fixed assets.
Among the policies of HMD, when an asset is acquired, it will be tagged for identification and
other necessary documentation. This important documentation is needed for subsequent
measurement and updating the fixed asset ledger. Depreciation will be estimated at year
end and posted to the general ledger, together with physical inventories of fixed assets.
Required:
(a) Identify the internal controls over the fixed assets at HMD, based on the following
controls:
(i) Authorization;
(ii) Accurate transaction;
(iii) Recorded transaction; and
(iv) Reasonableness of recorded transactions.
(b) Determine the adequate controls that may exist to safeguard the assets.
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