Custom Bundle: Accounting, Loose-leaf Version, 26th + Working Papers, Chapters 1-17, 26th Edition
26th Edition
ISBN: 9781305714731
Author: Warren/Reeve/Duchac
Publisher: Cengage
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Chapter 8, Problem 8.3CP
To determine
Internal Control: Internal control refers to the policies, and plans of the business organization along with other measures with a view to safeguard its assets, encourage the employees to adhere to the plans, to improve on the operational efficiency, and to ensure correct and reliable accounting information. Internal control is a process which ensures continuous reliability of accomplishment of a company’s objectives, related to operations, financial reporting, and in conformity with laws and regulations.
Five elements of internal control:
- Control Environment: Control Environment refers to the attitude of top brass of the company or the corporate culture. The top brass of the company must set the tone to improve the morale for rest of the employees of the business.
- Risk assessment: The business must be able identify the risk associated with it, and accordingly use the internal control to safeguard its assets and ensures fairness in presentation in accounting information.
- Control procedures: The objective of setting the control procedure is to ensure that the business achieves its objectives.
- Monitoring controls: The internal control used in the business is being monitored by the internal auditors who are hired by the business, to ensure that the employees are adhering to the policies of the business and running the operations efficiently. The external auditors on the other hand ensures that the business accounting records are being maintained in accordance with the Generally Accepted Accounting Principles (GAAP).
- Information and communication: Information and communication system is important for a business and hence only authorized persons should be allowed the access to the confidential accounting information. Approvals are also should be made mandatory for the transactions by the
control system.
To suggest: Appropriate control procedures for preventing / detecting the theft of grocery items by failing to scan their prices:
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The following is an excerpt from a conversation between the store manager of Wholesome Grocery Stores, Kara Dahl, and Lynn Shutes, president of Wholesome Grocery Stores:Lynn: Kara, I’m concerned about this new scanning system.Kara: What’s the problem?Lynn: Well, how do we know the clerks are ringing up all the merchandise?Kara: That’s one of the strong points about the system. The scanner automatically rings up each item based on its bar code. We update the prices daily, so we’re sure the sale is rung up for the right price.Lynn: That’s not my concern. What keeps a clerk from pretending to scan items and then simply not charging his friends? If his friends were buying 10–15 items, it would be easy for the clerk to pass several items through putting his finger over the bar code or just pass the merchandise through the scanner with the wrong side showing. It would look normal for anyone observing. In the old days, we at least could hear the cash register ringing up each sale.Kara: I see…
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?
Group of answer choices
1.The person in accounts payable should generate the purchase order.
2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received.
3.No changes would be made since the person paying the bills is different from the person ordering the inventory.
4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
Case Study A Scenario
A major retailer asked the IS auditor to review their readiness for complying with credit card company requirements for protecting cardholder information. The IS auditor subsequently learned the following information. The retailer uses wireless point-of-sale registers that connect to application servers located at each store. These registers use wired equivalent protection (WEP) encryption.
The application server, usually located in the middle of the store’s customer service area, forwards all sales data over a frame relay network to database servers located at the retailer’s corporate headquarters, and using strong encryption over an Internet virtual private network (VPN) to the credit card processor for approval of the sale.
Corporate databases are located on a protected screened subset of the corporate local area network. Additionally, weekly aggregate sales data by product line is copied from the corporate databases to magnetic media and mailed to a…
Chapter 8 Solutions
Custom Bundle: Accounting, Loose-leaf Version, 26th + Working Papers, Chapters 1-17, 26th Edition
Ch. 8 - Prob. 1DQCh. 8 - Why should the employee who handles cash receipts...Ch. 8 - Prob. 3DQCh. 8 - Why should the responsibility for maintaining the...Ch. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - The balance of Cash is likely to differ from the...Ch. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - (a) How are cash equivalents reported in the...
Ch. 8 - Internal control elements Identify each of the...Ch. 8 - Prob. 8.1APECh. 8 - Prob. 8.2BPECh. 8 - Prob. 8.2APECh. 8 - Prob. 8.3APECh. 8 - Prob. 8.3BPECh. 8 - Prob. 8.4APECh. 8 - Prob. 8.4BPECh. 8 - Prob. 8.5APECh. 8 - Prob. 8.5BPECh. 8 - Sarbanes-Oxley internal control report Using...Ch. 8 - Prob. 8.2EXCh. 8 - Prob. 8.3EXCh. 8 - Prob. 8.4EXCh. 8 - Prob. 8.5EXCh. 8 - Prob. 8.6EXCh. 8 - Prob. 8.7EXCh. 8 - Prob. 8.8EXCh. 8 - Prob. 8.9EXCh. 8 - Prob. 8.10EXCh. 8 - Prob. 8.11EXCh. 8 - Prob. 8.12EXCh. 8 - Prob. 8.13EXCh. 8 - Internal control of cash payments Abbe Co. is a...Ch. 8 - Prob. 8.15EXCh. 8 - Prob. 8.16EXCh. 8 - Prob. 8.17EXCh. 8 - Prob. 8.18EXCh. 8 - Prob. 8.19EXCh. 8 - Prob. 8.20EXCh. 8 - Prob. 8.21EXCh. 8 - Prob. 8.22EXCh. 8 - Prob. 8.23EXCh. 8 - Prob. 8.24EXCh. 8 - Prob. 8.25EXCh. 8 - Cash to monthly cash expenses ratio El Dorado Inc....Ch. 8 - Prob. 8.27EXCh. 8 - Prob. 8.28EXCh. 8 - Prob. 8.1APRCh. 8 - Prob. 8.2APRCh. 8 - Prob. 8.3APRCh. 8 - Prob. 8.4APRCh. 8 - Prob. 8.5APRCh. 8 - Prob. 8.1BPRCh. 8 - Prob. 8.2BPRCh. 8 - Prob. 8.3BPRCh. 8 - Prob. 8.4BPRCh. 8 - Prob. 8.5BPRCh. 8 - Ethics in Action During the preparation of the...Ch. 8 - Prob. 8.2CPCh. 8 - Prob. 8.3CPCh. 8 - Prob. 8.4CPCh. 8 - Prob. 8.5CPCh. 8 - Prob. 8.7CP
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