FINANCIAL ACCT.FUND.(LOOSELEAF)
7th Edition
ISBN: 9781260482867
Author: Wild
Publisher: MCG
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Chapter 6, Problem 3E
To determine
Introduction:
Internal
Whether each of the given procedure is an internal control weakness or strength. Also, identify the internal control principle violated or followed in each of the given procedure.
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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. 1. The same employee requests, records, and makes payment for purchases of inventory. 2. The company saves money by having employees involved in operations perform the only review of internal controls. 3. Time is saved by not updating records for use of supplies. 4. The recordkeeper is not allowed to write checks or initiate EFTs. 5. Each salesclerk is in charge of her own cash drawer.
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Items 1 through 10 present various internal controlstrengths or internal control deficiencies.1. Credit is granted by a credit department.2. Once shipment occurs and is recorded in the sales journal, all shipping documentsare marked “recorded” by the accounting staff.3. Sales returns are presented to a sales department clerk who prepares a written,prenumbered receiving report.4. Cash receipts received in the mail are received by a secretary with no recordkeepingresponsibility.5. Cash receipts received in the mail are forwarded unopened with remittance advicesto accounting.6. The cash receipts journal is prepared by the treasurer’s department.7. Cash is deposited weekly.8. Statements are sent monthly to customers.9. Write-offs of accounts receivable are approved by the controller.10. The bank reconciliation is prepared by individuals independent of cash receiptsrecordkeeping.a. For each of the preceding 1–10 items, indicate whether the item represents an:A. Internal control strength for…
Chapter 6 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
Ch. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQ
Ch. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Cash Over and Short P1 Record the journal entry...Ch. 6 - Prob. 6QSCh. 6 - Prob. 7QSCh. 6 - Prob. 8QSCh. 6 - Prob. 9QSCh. 6 - Prob. 10QSCh. 6 - Prob. 11QSCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 1PSACh. 6 - Prob. 2PSACh. 6 - Prob. 3PSACh. 6 - Prob. 4PSACh. 6 - Prob. 5PSACh. 6 - Prob. 1PSBCh. 6 - Prob. 2PSBCh. 6 - Prob. 3PSBCh. 6 - Prob. 4PSBCh. 6 - Prob. 5PSBCh. 6 - Prob. 6SPCh. 6 - Prob. 1GLPCh. 6 - Prob. 1AACh. 6 - Prob. 2AACh. 6 - Prob. 3AACh. 6 - Prob. 1BTNCh. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTNCh. 6 - Prob. 6BTN
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- A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.arrow_forwardWhich of the following is false about accounting information systems? A. They provide reports that people analyze. B. They prevent errors and stop employees from stealing inventory. C. They are designed to gather data about the companys transactions. D. They consist of processes that involve input of data from source documents, processing, output, and storage.arrow_forwardAuthorization of transactions is a key control in most organizations. Authorizations should not be made by individuals who have incompatible functions. For each transaction (listed as A through I), indicate the individual or function (e.g., the head of a particular department) that should have the ability to authorize that transaction. Briefly provide a rationale for your answer. a. Writing off old accounts receivable. B. Committing the organization to acquire another company that is half the size of the existing company. C. Paying an employee for overtime. D. Shipping goods on account to a new customer. E. Purchasing goods from a new vendor. F. Temporarily investing funds in common stock investments instead of money market funds. G. Purchasing a new line of manufacturing equipment to remodel a production line at one of the company’s major divisions (the purchase represents a major new investment for the organization). H. Replacing an older machine at one of the company’s major divisions. I. Rewriting the company’s major computer program for processing purchase orders and accounts payable (the cost of rewriting the program will represent one quarter of the organization’s computer development budget for the year).arrow_forward
- ZYNGA (LO Z 3, 4, 5, 6, 8) Refer to the Why It Matters feature “How to Account for Virtual Sales at Zynga.” a. What are the inherent risks associated with the revenue transactions at Zynga? b. What are management’s incentives to fraudulently misstate revenue transactions? c. What controls should Zynga management have in place to mitigate the risks associated with revenue transactions? d. How might auditors use planning analytical procedures to identify any potential concerns with Zynga’s revenue? e. What might be considered sufficient appropriate evidence when auditing Zynga’s revenue transactions?arrow_forwardThe company XYZ suffers from numerous weaknesses in its internal control system. For each the below situations, you are required to identify the anomaly/risk related to this system and propose eventual solutions. The financial department issues one copy of the sales bill that is shipped to the customer with the company The inventory custodian is the person who deliver the merchandise to the The person who keep the checks (issued and received) is the same who have access to the company accounting system. A has now 9 years experience in the company. He is responsible to keep cash and checks. Since he joining XYZ , he has not claim any vacation. The financial manager prepares the checks for the company suppliers and receive the merchandises ordered by the The company XYZ has recently installed an ERP system to manage all its activities . Different staff have access to this system. Mr X is working…arrow_forward1. A threat to the expenditure cycle that involves an employee creating and approving fictitious purchase orders is known as: A. Inventory theft B. Unauthorized access C. Check tampering D. Billing schemes 2. Purchase orders are used to initiate a payment in the disbursement cycle. True or False 3.Vendor audits are conducted to address the threat of unauthorized access in the disbursement cycle. True or falsearrow_forward
- Identifying internal controls Consider each situation separately. Identify the missing internal control procedure from these characteristics: Assignment of responsibilities Separation of duties Audits Electronic devices Other controls (specify) a. While reviewing the records of Quality Pharmacy, you find that the same employee orders merchandise and approves invoices for payment. b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold. c. The same trusted employee has served as a cashier for 12 years. d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on…arrow_forward5arrow_forwardNonearrow_forward
- 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_forwardaudit please quickly i will give you a thumb！！！arrow_forwardPls answerarrow_forward
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