Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 4, Problem 4ATC
To determine
Prepare a memo to the bank president, outlining the procedure that should be followed to prevent this type of problem in the future.
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Week 7Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchase orders, sales invoices and suppliers’ invoices to prepare journal vouchers for general ledger entries. Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At the end of each month, he reconciles the subsidiary accounts to their control accounts in the general ledger to ensure they balance.Discuss the internal control weaknesses and risks associated with the above process.
EXERCISE 7-3
Some of the following practices are suggestive of strerngth in internal controls
others are suggestive of weakness. Identify cach of the eight practices with the
term Strength or Weakness. Give reasons for your answers.
Internal Con-
trol: Identifying
, Strength and
Weakness
a Vouchers and all supporting documents are stamped “PAID" before being sent
to the finance department for review and signing of checks.
b Personnel in the accounting department are not authorized to handle cash re-
ceipts, Therefore, accounts receivable records are maintained by the credit.
manager, who handles all collections from customers.
c Accounting department personnel are not authorized to prepare bank reconcili-
ations. This procedure is performed in the finance department and the account
ing department is notified of any required adjustments to the accounts.
d Checks received through the mail are recorded daily by the person maintaining
accounts reccivable records.
e All cash receipts are…
CHAPTER 7
Internal Control and Cash
hris Component: One of your responsibilities as an employee with Halifax Fitness is to handle the petty
ni You are concerned about the auto expense claims made regularly by Kim Marin, the manager who
d u Kim tells you how much the expenditures are and you give her the cash out of petty cash. Kìm has
aET VOu receipts to substantiate her claims. The owner of the business is visiting and asks you how
ins are going. What should you do, if anything?? Explain.
Problem 7-3A Petty cash fund reimbursement and analysis of errors LO4
Canital Irrigation has only a general journal in its accounting system and uses it to record all transactions.
Houever, the company recently set up a petty cash fund to facilitate payments of small items. The following
pemy cash transactions were noted by the petty cashier as occurring during April 2020:
Received a company cheque for $300 to establish the petty cash fund.
Received a company cheque to replenish the fund for the…
Chapter 4 Solutions
Survey Of Accounting
Ch. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - Prob. 3QCh. 4 - Prob. 4QCh. 4 - Prob. 5QCh. 4 - Prob. 6QCh. 4 - What is meant by separation of duties? Give an...Ch. 4 - 9. What are the attributes of a high-quality...Ch. 4 - 10. What is a fidelity bond? Explain its purpose.Ch. 4 - Prob. 10Q
Ch. 4 - Prob. 11QCh. 4 - Prob. 12QCh. 4 - Prob. 13QCh. 4 - Prob. 14QCh. 4 - Prob. 15QCh. 4 - Prob. 16QCh. 4 - Prob. 17QCh. 4 - Prob. 18QCh. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 21QCh. 4 - Prob. 22QCh. 4 - Prob. 23QCh. 4 - Prob. 24QCh. 4 - Prob. 25QCh. 4 - Prob. 26QCh. 4 - Prob. 27QCh. 4 - Prob. 28QCh. 4 - Prob. 29QCh. 4 - Prob. 30QCh. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Prob. 16ECh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - Fraud triangle Sam Sharp is an accountant with a...Ch. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 1ATCCh. 4 - Prob. 3ATCCh. 4 - Prob. 4ATCCh. 4 - ATC 6-7 Ethical Dilemma I need just a little extra...
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Similar questions
- 5 Identify which control activity is violated in each of the following situations, and explain how the situation creates an opportunity for fraud or inappropriate accounting practices. Once a month, the sales department sends sales invoices to the accounting department to be recorded. Several clerks at Harper's Groceries use the same cash register drawer. Steve orders merchandise for Baker Company; he also receives merchandise and authorizes payment for merchandise.arrow_forwardDate Internal Control 623 A Preventive/ ts cash Control Ansd Detective 1. The Lions Inn uses a cash register. Accounting/ Administrative 2. The employee time clock is located just įve outside the manager's office. 50 3. An external auditor conducts a surprise cash audit quarterly. (OANavbedainimis 4. Only the front office supervisor may sldon approve room sales allowances. b tibun, lum supervisor y to hocen may - Fach room attendant's work in cleaning rooms is inspected by a housekeeping supervisor. 6 Cash receipts are deposited intact and on a daily basis. sgeb oanst prepares 7. The internal auditor bank reconciliation. The Far 8. Vegetables are stored in coolers at the proper the monthly A temperatures. 9. Supplier invoices are reconciled to the suppliers' monthly statements. 10. Cash drawers must be closed after each sale in all revenue centers. lsinm be 1. Indicate whether each control is preventive (P) or detective (D) and whether it is an accounting (AC) or administrative (AD)…arrow_forwardThe flowchart labeled Problem 14 depicts the responsibilities of an accounting clerk in a small company. Required Identify any control problems in the system. What sorts of fraud are possible in this system?arrow_forward
- Exercise 7-06 a The following control procedures are used in Bunny’s Boutique Shoppe for cash disbursements.(a) For each procedure, explain the weakness in internal control and identify the internal control principle that is violated. Procedure Weakness Principle Violated 1. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register. select a weakness The bank reconciliation is not independently preparedUnauthorized employees making purchasesFiling does not prevent a bill from being paid more than onceThe approval and payment of bills is done by the same individualUse of cash instead of checks; no prenumbered invoicesChecks are not stored in a secure area select a principle violated Physical controlsSegregation of dutiesDocumentation proceduresIndependent internal verificationEstablishment of responsibilityHuman resource controls 2. The store manager personally approves all payments before she signs and…arrow_forwardVignette 6.1 ERRONEOUS RECORD KEEPING This is it, Max-either you get our account straightened out, or we're taking our business to Sudential" This as the fourth customer in one week that had threatened Max. The large health insurance company Max worked for received hundreds of checks each day from its customers in payment of insurance premiums. Because of the routine nature of the job of keying in payments, the cash data entry clerk often got bored. His mind would wander to more scintillating topics. In the middle of the afternoon, the clerk had to really struggle just to stay awake. As a result, the clerk made many errors in entering the payments. He would transpose numbers and key in the customer codes incorrectly, causing credits to go into the wrong customer accounts. Max and other sales reps complained to top management about the mistakes in their customers' accounts. As a result, "management brought in two employees from other departments to review the customer accounts and…arrow_forwardVignette 6.1 ERRONEOUS RECORD KEEPING This is it, Max—either you get our account straightened out, or we're taking our business to Sudential" This as the fourth customer in one week that had threatened Max. The large health insurance company Max worked for received hundreds of checks each day from its customers in payment of insurance premiums. Because of the routine nature of the job of keying in payments, the cash data entry clerk often got bored. His mind would wander to more scintillating topics. In the middle of the afternoon, the clerk had to really struggle just to stay awake. As a result, the clerk made many errors in entering the payments. He would transpose numbers and key in the customer codes incorrectly, causing credits to go into the wrong customer accounts. Max and other sales reps complained to top management about the mistakes in their customers' accounts. As a result, "management brought in two employees from other departments to review the customer accounts and…arrow_forward
- Only #4arrow_forward7.4 The Gardner Company, a client of your firm, has come to you with the following prob- lem. It has three clerical employees who must perform the following functions: a. Maintain the general ledger b. Maintain the accounts payable ledger c. Maintain the accounts receivable ledger d. Prepare checks for signature e. Maintain the cash disbursements journal f. Issue credits on returns and allowances g. Reconcile the bank account h. Handle and deposit cash receipts Assuming equal abilities among the three employees, the company asks you to assign the eight functions to them to maximize internal control. Assume that these em- ployees will perform no accounting functions other than the ones listed. CHAPTER 7 CONTROL AND ACCOUNTING INFORMATION SYSTEMS 227 REQUIRED a. List four possible unsatisfactory pairings of the functions. b. State how you would distribute the functions among the three employees. Assume that with the exception of the nominal jobs of the bank reconciliation and the issu-…arrow_forwardExercise 6-3 (Algo) Internal control strengths and weaknesses LO C1 Determine whether each procedure described below is an internal control strength or weakness; then identify the internal control principle violated or followed for each procedure. An employee cannot approve their own request for purchases of inventory. Several salesclerks share the same cash drawer. Employees that handle easily transferable assets such as cash are bonded. The company devotes resources towards keeping accurate accounting records for machinery. The company saves money by having employees involved in operations perform the only review of internal controls.arrow_forward
- 12 To save time, the employer should ask the wage earners to keep a record of 11. Keeping personnel files in a locked filing cabinet is a corrective control. 7. A blank cheque can be signed to replenish the petty cash fund if it is 6. Cheque books should be kept in a locked safe as a preventive control. 5. Bank reconciliation statements need only be drawn up every six months. In order to be efficient, all employees should have direct access to 3. A good internal control procedure is where the same person is responsible for paying all accounts, writing all cheques and signing all cheques. 2. All payments should be made by cheque, except for petty cash payments. Read the following statements about internal controls. Write down the number should be re pared w 10. Any employee of a business should be able to buy assets for the business. All cash receipts should be stored in the cash register and deposited at the 1. Internal controls are not required when payments are made by cheque. of…arrow_forwardQuestion 32 Which of the following is LEAST indicative of fraudulent activity. Numerous cash refunds made to different people at the same PO box. Several credit memos cannot be located to support reductions in customers' balances. Bank reconciliation has no outstanding checks or deposits in transit older than fifteen days. Three people were absent the day the auditors handed out paychecks and these checks were not picked up until four weeks later.arrow_forwardA company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows: Employee Responsibility Clerk 1 Reviews vendor invoices for proper signature approval Clerk 2 Enters vendor invoices into the accounting system and verifies payment terms Clerk 3 Posts entered vendor invoices to the accounts payable ledger for payment and mails checks. Treasurer Reviews the vendor invoices and signs each check. Which of the following would indicate a weakness in the company’s internal control?a. Clerk 1 opens all of the incoming mail.b. Clerk 2 reconciles the accounts payable ledger with the general ledger monthly.c. Clerk 3 mails the checks and remittances after they have been signed.d. The treasurer uses a stamp for signing checks.arrow_forward
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