Identify the principle of internal control to each of the following cases. 1. Cash is locked in a safe overnight. 2. Employees who receive shipments of goods do not have access to the accounting records for merchandise. 3. Shipping documents are pre-numbered. 4. The bookkeeper does not have physical custody of assets. 5. Only the treasurer of the company can sign checks.
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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.What is the advantage of using technology in the internal control system? A. Passwords can be used to allow access by employees. B. Any cash received does not need to be reconciled because the computer tracks all transactions. C. Transactions are easily changed. D. Employees cannot steal because all cash transactions are recorded by the computer/cash register.The vice president of finance asks the accounts payable (AP) clerk to write a check in the name of the president for $10,000. He and the president will sign the check (two signatures needed on a check of this size). He further instructs the AP clerk not to disclose this check to her immediate supervisor. What should the AP clerk do? Should she prepare the check? Should she inform her immediate supervisor? Discuss with internal controls in mind.
- Which of the following is not an example of control procedures to safeguard cash received from accounts receivables? A.All receipts of cash should be recorded in the cash acount B.Employees keep records of all the receipts,with details of the amount received C.One employee is in charge of receiving cash and another employee in charge of preparing accouting records D.One employee should be responsible for collecting and banking cash receipts on a daily basisThe internal control procedures in Philips Company make the following provisions. Identify the principles of internal control that are being followed in each case. Employees who have physical custody of assets do not have access to the accounting records. Each month the assets on hand are compared to the accounting records by an internal auditor. A prenumbered shipping document is prepared for each shipment of goods to customers. All over-the-counter receipts are registered on cash registers. All cashier are bonded. Daily cash counts are made by Cashier department supervisors. The Duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals. Only Cashier may operate cash registers. Company checks are prenumbered. The bank statement is reconciled monthly by an internal auditor. Blank checks are stored in a safe in the treasurer’s office. Only the treasurer or assistant treasurer may sign checks. Checks signers are not allowed to record cash…Which of the following controls would best prevent the lapping of accounts receivable?a. Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.b. Request that customers review their monthly statements and report any unrecorded cash payments.c. Require customers to send payments directly to the company’s bank.d. Request that customers make checks payableto the company.
- Which of the following controls will help prevent skimming? a. The accounts receivable bookkeeper’s duties are separated from preparing the bank deposit b. The accounts receivable bookkeeper has access to collections from customers. c. The accounts receivable bookkeeper is responsible for preparing the bank deposit. d. The accounts receivable bookkeeper makes all entries in the cash receipts book.What internal control procedure ( s ) would provide protection against the following threats ? An employee writes off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer .Required: Which internal control(s) would you recommend to prevent the following situations from occurring? Situation a. Authorization of a credit memo for a customer's account (on receivables) when the goods were never actually returned. b. Theft of funds by the cashier, who cashed several checks and did not record their receipt. c. Inventory stolen by receiving dock personnel. The receiving clerk claimed the inventory was sent to the warehouse, but the warehouse clerk did not record properly. d. Writing off a customer's accounts receivable balances as uncollectible in order to conceal the theft of subsequent cash collections. e. Billing customers for the quantity ordered when the quantity shipped was actually less due to back- ordering of some items. Answer
- The following are deficiencies in internal controls over cash. a. When the cashier isn't available, Amy prepares both the deposit and opens the mail. b. The mail clerk may not prepare remittance advice for the A/R department if a customer does not submit a one with payment. c. Sometimes, the treasurer's department does not stop the supporting documents for cash disbursements. d. John handles both the customer correspondence concerning monthly statements and making the bank deposits. e. Mike handles incoming mail and also prepares bank reconciliations; however, the bank reconciliations are not done in a timely manner. For each deficiency: Determine what applicable audit procedure(s) should be conducted to identify whether any material misstatements exist Explain why you think this procedure is best for this situation. Consider each deficiency independently of the others. While each deficiency presents potential issues, identify two that stand out as the worse with your professional…Rolling Hills Ltd. has the following internal controls over cash payments. Identify the control activity that is applicable to each procedure. 1. 2. 3. 4. 5. 6. Company cheques are prenumbered. The bank statement is reconciled monthly by the assistant controller. Blank cheques are stored in a safe in the controller's office. Both the controller and the assistant controller are required to sign cheques or authorize electronic payments. Cheque signers are not allowed to record cash payments. All payments are made by cheque or electronic transfer. Assignment of responsibility Review and reconciliation Segregation of duties Physical controls DocumentationEach morning the controller gets the prior day’s list of remittances, a copy of the payment report, and a copy of the deposit slip returned from the bank. When comparing these items, the controller would be able to determine thata. No checks were returned for insufficient funds.b. The cash received and remittance advice received were maintained in a single batch.c. The accounts receivable system has controls over unauthorized access.d. The assistant controller does not also reconcile the subsidiary accounts payable.