The following are partial descriptions of internal controls for companies engaged in the manufacturing business: 1. When Mr. Clark orders materials, an electronic copy of the purchase order is sent to the receiving department. During the delivery of materials, Mr. Smith, the receiving clerk, records the receipt of shipment on this purchase order and then sends the purchase order to the accounting department, where it is used to record materials purchased and accounts payable. The materials are transported to the storage area by forklifts. The additional purchased quantities are recorded on storage records. 2. Every day, hundreds of employees clock in using their employee identification cards at Generous Motors Corporation. The data on these time records is used in the preparation of the labor cost distribution records, the payroll journal, and the electronic payments and payroll checks. The treasurer, Angela Lee, compares the payroll journal with the payroll records, signs the checks, and returns the payroll notifications and checks to Charles Strode, the supervisor of the computer department. The payroll checks and payment notices are distributed to the employees by Strode. 3. The smallest branch of Connor Cosmetics employs Mary Cooper, the branch manager, and her sales assistant, Janet Hendrix. The branch uses a bank account to pay expenses. The account is kept in the name of "Connor Cosmetics Special Account." To pay expenses, checks must be signed by Cooper or by the treasurer, John Winters. Cooper receives the cancelled checks and bank statements. She reconciles the branch account herself and files cancelled checks and bank statements in her records. She also periodically prepares reports of cash disbursements and sends them to the home office. Required: Required List the deficiencies in internal control for each of these situations.
The following are partial descriptions of internal controls for companies engaged in the manufacturing business: 1. When Mr. Clark orders materials, an electronic copy of the purchase order is sent to the receiving department. During the delivery of materials, Mr. Smith, the receiving clerk, records the receipt of shipment on this purchase order and then sends the purchase order to the accounting department, where it is used to record materials purchased and accounts payable. The materials are transported to the storage area by forklifts. The additional purchased quantities are recorded on storage records. 2. Every day, hundreds of employees clock in using their employee identification cards at Generous Motors Corporation. The data on these time records is used in the preparation of the labor cost distribution records, the payroll journal, and the electronic payments and payroll checks. The treasurer, Angela Lee, compares the payroll journal with the payroll records, signs the checks, and returns the payroll notifications and checks to Charles Strode, the supervisor of the computer department. The payroll checks and payment notices are distributed to the employees by Strode. 3. The smallest branch of Connor Cosmetics employs Mary Cooper, the branch manager, and her sales assistant, Janet Hendrix. The branch uses a bank account to pay expenses. The account is kept in the name of "Connor Cosmetics Special Account." To pay expenses, checks must be signed by Cooper or by the treasurer, John Winters. Cooper receives the cancelled checks and bank statements. She reconciles the branch account herself and files cancelled checks and bank statements in her records. She also periodically prepares reports of cash disbursements and sends them to the home office. Required: Required List the deficiencies in internal control for each of these situations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The following are partial descriptions of internal controls for
companies engaged in the manufacturing business:
1. When Mr. Clark orders materials, an electronic copy of the
purchase order is sent to the receiving department. During the
delivery of materials, Mr. Smith, the receiving clerk, records the
receipt of shipment on this purchase order and then sends the
purchase order to the accounting department, where it is used to
record materials purchased and accounts payable. The materials
are transported to the storage area by forklifts. The additional
purchased quantities are recorded on storage records.
2. Every day, hundreds of employees clock in using their employee
identification cards at Generous Motors Corporation. The data
on these time records is used in the preparation of the labor cost
distribution records, the payroll journal, and the electronic
payments and payroll checks. The treasurer, Angela Lee,
compares the payroll journal with the payroll records, signs the
checks, and returns the payroll notifications and checks to
Charles Strode, the supervisor of the computer department. The
payroll checks and payment notices are distributed to the
employees by Strode.
3. The smallest branch of Connor Cosmetics employs Mary Cooper,
the branch manager, and her sales assistant, Janet Hendrix. The
branch uses a bank account to pay expenses. The account is kept
in the name of "Connor Cosmetics -Special Account." To pay
expenses, checks must be signed by Cooper or by the treasurer,
John Winters. Cooper receives the cancelled checks and bank
statements. She reconciles the branch account herself and files
cancelled checks and bank statements in her records. She also
periodically prepares reports of cash disbursements and sends
them to the home office.
Required:
Required List the deficiencies in internal control for each of
these situations.
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