Working Papers for Warren/Reeve/Duchac's Corporate Financial Accounting, 14th
14th Edition
ISBN: 9781305878839
Author: Carl Warren, Jonathan Duchac, James M. Reeve
Publisher: Cengage Learning
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Question
Chapter 7, Problem 7.7EX
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. The following are the some of the internal control procedures:
- Competent personnel, rotating duties, and mandatory vacations
- Separating responsibilities for related operations
- Separating operations, custody of assets, and accounting
- Proofs and security measures
To state: The general internal control weakness contributed to the fraud.
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All-Around Sound Co. discovered a fraud whereby one of its front office administrative employees used company funds to purchase goods such as computers, digital cameras, and other electronic items for her own use. The fraud was discovered when employees noticed an increase in the frequency of deliveries from vendors and the use of unusual vendors. After some investigation, it was discovered that the employee would alter thedescription or change the quantity on an invoice in order to explain the cost on the bill.What general internal control weaknesses contributed to this fraud?
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.
What internal control or procedure(s) would provide protection against the following threats?
An employee makes a credit sale to a customer who is already four months behind in making payments on his account.
An employee writes off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer
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.
Chapter 7 Solutions
Working Papers for Warren/Reeve/Duchac's Corporate Financial Accounting, 14th
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Why should the responsibility for maintaining the...Ch. 7 - Assume that Brooke Miles, accounts payable clerk...Ch. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 7.1BECh. 7 - Prob. 7.2BECh. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.1EXCh. 7 - Prob. 7.2EXCh. 7 - Prob. 7.3EXCh. 7 - Prob. 7.4EXCh. 7 - Prob. 7.5EXCh. 7 - Prob. 7.6EXCh. 7 - Prob. 7.7EXCh. 7 - Prob. 7.8EXCh. 7 - Prob. 7.9EXCh. 7 - Prob. 7.10EXCh. 7 - Prob. 7.11EXCh. 7 - Entry for cash sales; cash short The actual cash...Ch. 7 - Entry for cash sales; cash over The actual cash...Ch. 7 - Prob. 7.14EXCh. 7 - Prob. 7.15EXCh. 7 - Prob. 7.16EXCh. 7 - Prob. 7.17EXCh. 7 - Prob. 7.18EXCh. 7 - Prob. 7.19EXCh. 7 - Prob. 7.20EXCh. 7 - Prob. 7.21EXCh. 7 - Prob. 7.22EXCh. 7 - Prob. 7.23EXCh. 7 - Prob. 7.24EXCh. 7 - Prob. 7.1APRCh. 7 - Prob. 7.2APRCh. 7 - Prob. 7.3APRCh. 7 - Prob. 7.4APRCh. 7 - Prob. 7.5APRCh. 7 - Prob. 7.1BPRCh. 7 - Prob. 7.2BPRCh. 7 - Prob. 7.3BPRCh. 7 - Prob. 7.4BPRCh. 7 - Prob. 7.5BPRCh. 7 - Prob. 7.1ADMCh. 7 - Prob. 7.2ADMCh. 7 - Prob. 7.3ADMCh. 7 - Nike, lululemon, and Under Armour: Days cash on...Ch. 7 - Ethics in Action Tehra Dactyl is an accountant for...Ch. 7 - Prob. 7.3TIF
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Similar questions
- 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_forwardA purchasing agent for a large hardware retailer hassole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent’s brother- in-law, which charges above-market prices for its products. The agent’s relationship with the supplier is unknown to his employer. What type of Fraud is this? What controls can be implemented to prevent and detect this fraud?arrow_forward1. What does it mean to say that internal control has limitations and what are these limitations? 2. Provide 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? 3. What is petty cash and what purpose(s) does it serve? 4. What types of controls should be in place to make sure people in the office don't just take from petty cash (for their own personal use) whenever they feel like it? In your opinion, what is an appropriate amount to have in petty cash? 5. Prepare the necessary journal entries for each of the following: (a) On March 1, issued a check to establish a petty cash fund of $1,410 (b)…arrow_forward
- Paragon Tech Company, a communications equipment manufacturer, recently fell victim to a fraud scheme developed by one of its employees. To understand the scheme, it is necessary to review Paragon Tech’s procedures for the purchase of services. The purchasing agent is responsible for ordering services (such as repairs to a photocopy machine or office cleaning) after receiving a service requisition from an authorizedmanager. However, because no tangible goods are delivered, a receiving report is not prepared. When the Accounting Department receives an invoice billing Paragon Tech for a service call, the accounts payable clerk calls the manager who requested the service in order to verify that it was performed.The fraud scheme involves Mae Jansma, the manager of plant and facilities. Mae arranged for her uncle’s company, Radiate Systems, to be placed on Paragon Tech’s approved vendor list. Mae did not disclose the family relationship. On several occasions, Mae would submit a requisition…arrow_forwardFor each of the following three independent cases of employee fraud, recommend how to prevent similar problems in the future: Case A: Due to abnormal inventory shrinkage in the audiovisual department at a retail chain store, internal auditors conducted an in- depth audit of the department. They learned that a customer frequently bought large numbers of small electronic components from a certain cashier. The auditors discovered that they had colluded to steal electronic components by not recording the sale of items the customer took from the store. Case B: During an unannounced audit, auditors discovered a payroll fraud when they distributed paychecks instead of department supervisors. When the auditors investigated an unclaimed paycheck, they discovered that the employee quit four months previously after arguing with the supervisor. The supervisor continued to turn in a time card for the employee and pocketed his check. Case C: Auditors discovered an accounts payable clerk who made…arrow_forward
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