Auditing and Assurance Services (16th Edition)
Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
Question
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Chapter 10, Problem 28DQP

a

To determine

Identify the weaknesses in the given scenario.

b

To determine

Provide suggestions to change the process to reduce the future fraud potential.

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Appliances Repair and Service Company bills allcustomers rather than collecting in cash when services are provided. All mail is opened byTom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is inthe office daily. Therefore, he can solve problems and respond to customers’ needs quickly.Upon receipt of cash, he immediately prepares a listing of the cash and a duplicate depositslip. Cash is deposited daily. Gyders uses the listing to enter the financial transactions in thecomputerized accounting records. He also contacts customers about uncollected accountsreceivable. Because he is so knowledgeable about the business and each customer, he grantscredit, authorizes all sales allowances, and charges off uncollectible accounts. The owneris extremely pleased with the efficiency of the company. He can run the business withoutspending much time there because of Gyders’ effectiveness.Imagine the owner’s surprise when he discovers that Gyders has committed a…
Appliances Repair and Service Company bills all customers rather than collecting in cash when services are provided. All mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. Therefore, he can solve problems and respond to customers’ needs quickly. Cash is deposited daily. Gyders. uses the listing to enter the financial transactions in the franklyn computerized accounting records. He also contacts customers about uncollected accounts receivable. Because he is so knowledgeable about the business and each customer, he grants credit, authorizes all sales allowances, and charges off uncollectible accounts. The owner is extremely pleased with the efficiency of the company. He can run the business without spending much time there because of Gyders’ effectiveness. Imagine the owner’s surprise when he discovers that Gydes has committed a major theft of the company’s cash receipts. He did so by not recording sales,…
Takunda (Pty) (Takunda) Ltd is a cleaning company. Customers’ windows are cleaned monthly, the window cleaner then posts a stamped addressed envelope for payment through the customer’s front door. SHW has a large number of receivable balances, and these customers pay by cheque or cash, which is received in the stamped addressed envelopes in the post.The following procedures are applied to the cash received cycle:A junior clerk from the accounts department opens the post and if any cheques or cash have been sent, she records the receipts in the cash received log and then places all the monies into the locked small cash box. The contents of the cash box are counted each day and every few days these sums are banked by whichever member of the finance team is available.The cashier records the details of the cash received log into the cash receipts daybook and updates the sales ledger.Usually on a monthly basis, the cashier performs a bank reconciliation, which he then files, if he misses a…
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