College Accounting (Book Only): A Career Approach
13th Edition
ISBN: 9781337280570
Author: Scott, Cathy J.
Publisher: South-Western College Pub
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Chapter 6, Problem 2A
To determine
Explain the way in which the Petty Cash Fund can be operated to use more efficiently and accurately.
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You are the auditor for Konerko’s Office Supply Store, which is opening for business next week. The store owner has established all the controls you have recommended for ensuring that sales are recorded properly and cash is accounted for. The owner has heard from other small business owners that employees often used returned goods as means of skimming money from the register.
a. How might an employee use returned goods to skim money from the register?
b. What controls would you recommend to prevent or detect fraudulent returns?
c. What audit procedures might you perform to detect fraudulent returns?
You are the auditor for Konerko’s Office Supply Store, which is opening for business next week. The store owner has established all the controls you have recommended for ensuring that sales are recorded properly and cash is accounted for. The owner has heard from other small business owners that employees often used returned goods as means of skimming money from the register.Required:a. How might an employee use returned goods to skim money from the register?b. What controls would you recommend to prevent or detect fraudulent returns?c. What audit procedures might you perform to detect fraudulent returns?
Allison Everhart, an employee in accounts payable, believes she can run a fictitious invoice through the accounts payable system and collect the money. She knows payments are subject to an audit. Which account would be the best place to hide the fraud?a. Inventory.b. Wage expense.c. Consulting service expense.d. Property tax expense.
Chapter 6 Solutions
College Accounting (Book Only): A Career Approach
Ch. 6 - Prob. 1QYCh. 6 - Prob. 2QYCh. 6 - Which of the following does not explain the...Ch. 6 - What is the journal entry to record an NSF check,...Ch. 6 - Prob. 5QYCh. 6 - Prob. 6QYCh. 6 - Prob. 7QYCh. 6 - Prob. 8QYCh. 6 - Prob. 1DQCh. 6 - Prob. 2DQ
Ch. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - a. Why would a business use a Petty Cash Fund? b....Ch. 6 - Prob. 8DQCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - a. Describe the entries that have been posted to...Ch. 6 - Prob. 1PACh. 6 - Prob. 2PACh. 6 - Prob. 3PACh. 6 - Prob. 4PACh. 6 - Prob. 5PACh. 6 - Prob. 1PBCh. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Prob. 5PBCh. 6 - Prob. 1ACh. 6 - Prob. 2ACh. 6 - You work as a cashier for a service business. Some...
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- There are several elements to internal controls. Which of the following would not address the issue of having cash transactions reported in the accounting records? A. One employee would have access to the cash register. B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a prenumbered form. C. Ask customers to report to a manager if they do not receive a sales receipt or invoice. D. The person behind the cash register should also be responsible for making price adjustments.arrow_forwardSome strategies in management can use to implement controls to ensure the integrity and existence of the client's cash balances. Reconciling cash can be a great control in most cases since receipts tie to deposits so it's accurate and cash exists since it hits the bank account. Now reconciling on a daily basis is important as well but would you be able to negotiate the cash box if the employee was using a lapping fraud to steal money? If they took $100 of cash and issued a manual receipt to the customer then used the next $100 to come in to clear the AR from the first customer on the cash receipt system, wouldn't I still reconcile? What could I do as a manager to prevent this type of fraud from occurring?arrow_forwardWhich of the following procedures would weaken control over cash receipts that arrive through the mail? Multiple Choice After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent. The cashier deposits the money in the bank and the recordkeeper records the amounts received in the accounting records. For safety, only one person should open the mail, and that person should deposit the cash received in the bank at the end of each month. The bank reconciliation is prepared by a person who does not handle cash or record cash receipts. The employees handling the cash receipts are bonded.arrow_forward
- An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and the related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all: Multiple Choice Cash disbursements. Approved vouchers. Receiving reports. Vendors' invoices.arrow_forwardThe following misstatements are included in the accounting records of the Dillon Manufacturing Company: Cash paid on accounts receivable was stolen by the mail clerk when the mail was opened. A sales invoice was miscalculated by $1,000 as a result of a key-entry mistake. Cash paid on accounts receivable that had been prelisted by a secretary was stolen by the bookkeeper, who records cash receipts and accounts receivable. He failed to record the transactions. A material sale was recorded on the last day of the year even though the goods were not shipped until three days later. Merchandise was shipped to a customer, but no bill of lading was prepared. Because billings are prepared from bills of lading, the customer was not billed. The controller approved a payment to a consulting firm owned by his sister. The consulting firm did not actually perform any services for the company. The shipping clerk included several additional valuable items in a shipment that were not…arrow_forwardProvide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented?arrow_forward
- What internal control or procedure(s) would provide protection against the following threats? Customers are billed for the quantity ordered, but the quantity shipped is actually less because some items have been back ordered. The mailroom clerk steals checks and then endorses them for deposit into the clerk’s personal bank account Goods are shipped to a customer, but that customer is not billed.arrow_forwardWhat is wrong in the following scenario?Jack O.A. Trade is an accountant is a small enterprise. Aside from keeping the books and preparing the financial statements, he is also in charge of removing and counting the cash from the cash register at the end of each day; comparing the cash with the duplicate sales slips used for recording cash sales; and depositing the cash with the enterprise' depository bank the next banking day. His duties also include releasing checks to the suppliers which he could sign in the absence of the owner and preparing the bank reconciliation statement at the end of each month.arrow_forwardDetermine whether each cash receipts procedure is an internal control strength or weakness. 1. If a salesclerk makes an error in recording a cash sale, she can access the register’s electronic record to correct the transaction. 2. All sales transactions, even those for less than $1, are recorded on a cash register. 3. Two employees are tasked with opening mail that contains cash receipts. 4. One of the two employees tasked with opening mail is also the recordkeeper for the business. 5. The supervisor has access to both cash and the accounting records. 6. Receipts are given to customers only for sales that are above $20.arrow_forward
- Investigating a Fraud. Suppose you are auditing cash disbursements and discover severalpayments to a company you are unfamiliar with and cannot find information about this company on the Internet or in the local telephone directory. The invoices from this company have numbers very close to each other in the sequence, there is no phone number on the invoice, and each bill is for a dollar amount just under the amount that would require additional approvals before payment. Based on this information, you now suspect this may be a fraud.Required:Based on your suspicions, how would you change the audit procedures you would perform, and how might you change the evidence you gather?arrow_forwardUnder the imprest system, which amount the following situations when accounting entry is/are made? a. petty cashier accommodated and encashed the check of her friend from the purchasing department b. Christmas party contributions made the custodian's circle of friends where the custodians is in charge of its safekeeping c. it is a reporting period and the fund aren't replenished yet d. pending request of the petty cash custodian to increase the petty cash fund e. request and disbursement of fun by the company's messenger for the weekarrow_forwardWhich of the following are important elements of a cash disbursement control system? Note: Select all that apply. Check All That Apply All expenditures are authorized before a check is prepared. Checks are signed only by authorized Individuals. The bank-generated deposit slip should be compared with the check listing. The person opening the mall is not the person who maintains the accounting records. Unauthorized payments are prevented.arrow_forward
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