Sherrie, a member, performs various bookkeeping functions for her very small closely held clients including posting cash receipts and disbursements to the client's general ledger. The client provides Sherrie with copies of check stubs and deposit slips where the client has provided account codes that Sherrie merely records in the general ledger. In addition, on a monthly basis, Sherrie calculates adjusting journal entries for depreciation, amortization, and tax accruals and posts these entries to the client's general ledger. Which of the following statements is true regarding Sherrie's independence with regard to these bookkeeping clients? O Sherrie's posting of client coded cash receipts and disbursements does not impair independence. O Sherrie's posting of adjusting journal entries does not impair independence whether or not she discusses them with the client because these are routine accounting entries that small clients do not understand. O Neither of the described functions would impair independence under any circumstances. None of the above statements is true.

Sherrie, a member, performs various bookkeeping functions for her very small closely held clients including posting cash receipts and disbursements to the client's general ledger. The client provides Sherrie with copies of check stubs and deposit slips where the client has provided account codes that Sherrie merely records in the general ledger. In addition, on a monthly basis, Sherrie calculates adjusting journal entries for depreciation, amortization, and tax accruals and posts these entries to the client's general ledger. Which of the following statements is true regarding Sherrie's independence with regard to these bookkeeping clients? O Sherrie's posting of client coded cash receipts and disbursements does not impair independence. O Sherrie's posting of adjusting journal entries does not impair independence whether or not she discusses them with the client because these are routine accounting entries that small clients do not understand. O Neither of the described functions would impair independence under any circumstances. None of the above statements is true.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You are auditing the Digos People’s Cooperative with a substantial annual sales, all of which are billed and collected locally. During your preliminary review of internal control, you discover the following procedures for handling cash receipts: Cash collections on over-the-counter and COD sales are received by the cashier from the customer or from the delivery service. Upon receiving cash, the cashier stamps the sales ticket “paid” and files a copy. The only record of COD sales is a copy of the sales ticket, which is given to the cashier to hold until cash is received from the delivery service. Mail is opened by the credit manager’s secretary, and remittances are given to the credit manager for review. The credit manager then places the remittances in a try on the cashier’s desk. At the time of the daily deposit – called “deposit cutoff time” – the cashier delivers the checks and currencies to the assistant credit manager, who prepares remittance lists and the bank deposit, and…
On February 15, 2022, Kate Collins, owner of Kate’s Cards, asks you to investigate the cash han- dling activities in her business. She believes that a new employee might be stealing funds. “I have no proof,” she says, “but I’m fairly certain that the January 31, 2022, undeposited receipts amounted to more than $12,000, although the January 31 bank reconciliation prepared by the cashier (who works in the treasurer’s department) shows only $7,238.40. Also, the January bank reconciliation doesn’t show several checks that have been outstanding for a long time. The cashier told me that these checks needn’t appear on the reconciliation because he had notified the bank to stop payment on them and he had made the necessary adjustment on the books. Does that sound reasonable to you?” At your request, Kate shows you the following (unaudited) January 31, 2022, bank reconciliation prepared by the cashier: KATE’S CARDS Bank Reconciliation January 31, 2022 Ending balance from bank statement . . . $…
Bev is completing the monthly bank reconciliation for her checking account for the month of October. The following facts apply: The balance per the bank on Oct 31st = $3,000 The balance per her checkbook on Oct 31st = $6,000 Deposits in Transit = $2,000 Outstanding Checks = $500 EFT’s ‘into’ her account = $4,000 EFT’s ‘out of’ her account = $5,500 No interest was earned on the account, and there were no bank fees during the month.
A local bank began charging $3.40 each month for returning canceled checks. The bank also has an $8.10 "maintenance" fee if a checking account slips below $750.00. Donna Sands likes to have copies of her canceled checks for preparing her income tax returns. She has received her bank statement with a balance of $603.73. Donna received $4.88 in interest and has been charged for the canceled checks and the maintenance fee. The following checks were outstanding: Number 94, $133.49, Number 96, $111.40, Number 98, $212.28; and Number 99, $82.30. A deposit of $777.15 was not recorded on Donna's bank statement. Her checkbook shows a balance of $848.03. Prepare Donna's bank reconciliation. Note: Input all amounts as positive values. Round your answers to 2 decimal places. Donna's checkbook balance Add: Subtotal Deduct Subtotal Reconciled balance BANK RECONCILIATION Bank balance Add Subtotal Deduct. Reconciled balance
David had the following activity with his checking account during the month of July: Starting checkbook balance of $701.13 July 15 electronic payroll deposit of $1,807.44 Online payment of $109.17 to Ameren Utilities Online payment of $104.00 to Gas Company Checks written on July 15 totaling $984.15 On July 27, he received an electronic payroll deposit of $1,807.43 What was David's checkbook balance as of July 31?
Braun issued a $35 check to Rice. Rice took the check to Braun’s bank and had it certified. Rice then raised the amount to $350 and negotiated it to Turner. Turner presented the check for payment and received $350. When Braun received her canceled checks, she noticed the alteration and notified the bank. Who will suffer the loss?
Susan Small, CPA has Medium Corporation as an audit client. Medium has asked Small to create and install a new computerized payroll system. Because Small does not have the appropriate level of expertise, she referred Medium to Compusystems, Inc., a local software consulting company. Small has an arrangement where she is paid ten percent of any fee received by Compusystems from her referrals. Small has disclosed this to her client. Required: The situation above involves a possible violation of the AICPA's Code of Professional Conduct. State the rule in question and explain why or why not there is a violation of the code. You need not refer to the rule number, but should clearly describe the rule in question.
For each of the following independent situations, indicate whether there is an apparent internal control weakness, and, if one exists, suggest alternative procedures to eliminate the weakness. 1. John Smith is the petty cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John submits to his supervisor a list of all accounts and amounts to be charged, along with supporting documentation. Once the supervisor indicates approval, a check is written to replenish the fund for the total amount. John's supervisor performs surprise counts of the fund to ensure that the cash and/or receipts equal $200 at all times. 2. All of the company's cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported by the appropriate invoice and, for purchases, a receiving document. The vouchers are approved by Dean Leiser, the chief accountant, after…
Cain, the authorized signer on his company's accounts, prepared and signed a check payable to the company's plumber. He gave the check to Baker, his secretary, and asked her to mail the check to the plumber. Instead, Baker took the check home, signed the plumber's name on the back, and had her husband cash the check at their grocery store. Baker committed which of the following schemes? a. An authorized maker scheme O b. A forged endorsement scheme O c. An altered payee scheme O d. A forged maker scheme
A local bank began charging $4.80 each month for returning canceled checks. The bank also has an $10.75 "maintenance" fee if a checking account slips below $750.00. Donna Sands likes to have copies of her canceled checks for preparing her income tax returns. She has received her bank statement with a balance of $599.36. Donna received $4.18 in interest and has been charged for the canceled checks and the maintenance fee. The following checks were outstanding: Number 94, $129.88; Number 96, $138.20; Number 98, $229.24; and Number 99, $69.03. A deposit of $803.81 was not recorded on Donna's bank statement. Her checkbook shows a balance of $848.19. Prepare Donna's bank reconciliation. Note: Input all amounts as positive values. Round your answers to 2 decimal places. Donna's checkbook balance Add: Subtotal Deduct: Subtotal Reconciled balance BANK RECONCILIATION Bank balance Add: Subtotal Deduct: Reconciled balance
Mr. P's bank statement dated 31.12.2021 showed a balance with his Bank of $924, when checked with his Cash Book the following were noted :(a) During December, the Bank had paid $200 for a yearly contribution of Mr. P made to a local charity, as per his standing order. This amount appeared in the Bank statement but not in the Cash Book.(b) The Bank had credited his account with $28 interest and had collected on his behalf `$230 as dividends. No corresponding entries were made in the Cash Book.(c) A cheque of $65 deposited into the Bank on 28.12.2021 was not cleared by the Bank till after 31.12.2021(d) A cheque of $150 deposited into and cleared by the Bank before 31.12.2021 was not entered in the Cash Book, through an oversight.(e) Cheques drawn by and posted to parties by Mr. White on 31.12.2021 for $73, $119 and $46 were presented for payment to the Bank only on 3.1.2021.
Taylor, a CPA, has been engaged to audit the financial statements of University Books, Incorporated. University Books maintains a large cash fund exclusively for the purpose of buying used books from students for cash. The cash fund is active all year because the nearby university offers a large variety of courses with varying starting and completion dates throughout the year. Receipts are prepared for each purchase. Reimbursement vouchers periodically are submitted to replenish the fund. Required:Construct an internal control questionnaire to be used in evaluating the internal control over University Books’ repurchasing process using the revolving cash fund. The internal control questionnaire should elicit a yes or no response to each question. Do not discuss the internal controls over books that are purchased from publishers.