1.
Suggest a control to prevent it from happening for the misstatement, if a bill from a supplier was paid even though the shipment was not received.
2.
Suggest a control to prevent it from happening for the misstatement, if a supplier’s bill was paid twice for the same purchase.
3.
Suggest a control to prevent it from happening for the misstatement, if a plant employee increased the pay rate by entering the computer system using a plant terminal and altering the payroll records.
4.
Suggest a control to prevent it from happening for the misstatement, if the cash receipts clerk kept a portion of the regular bank deposits for personal use and concealed the theft by manipulating the monthly bank reconciliation prepared.
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College Accounting, Chapters 1-27
- 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_forwardAble, an accounts payable supervisor for ABC Company, bought supplies for a company he owned on the side. Able entered vouchers in ABC Company’s accounts payable system for the cost of the supplies. Checks were cut to pay for these unauthorized expenses during normal daily check runs. The goods ordered were drop-shipped to a location where Able could collect them. This is an example of: a. An expense reimbursement scheme b. A commission scheme c. A billing scheme d. An invoice kickback schemearrow_forwardDetermine whether each cash receipts procedure is an internal control strength or weakness. Cash receipts 1. If a sales clerk makes an error in recording a cash sale, they can access the register's electronic record to correct the transaction. 2. One of the two employees tasked with opening mail is also the recordkeeper for the business. 3. The supervisor has access to both cash and the accounting records. 4. Receipts are given to customers for only sales that are above $20. 5. Sales clerks are not required to enter the sale in the register after each transaction. Instead, the company gives employees flexibility to enter sales at the end of the day or week. 6. The recordkeeper of cash transactions is also in charge of depositing cash receipts in the bank. Strength or Weaknessarrow_forward
- The following are internal controls that theauditor has identified for various cycles.1. Sales invoices are matched with shipping documents and customer orders beforerecording in the sales journal.2. Receiving reports are prenumbered and accounted for on a daily basis.3. Sales invoices are independently verified before being sent to customers.4. Payments by check are received in the mail by the receptionist, who lists the checksand restrictively endorses them.5. Overtime hours for payroll are approved by the employee’s supervisor.6. Checks are signed by the company president, who compares the checks with theunderlying supporting documents.7. Unmatched shipping documents are accounted for on a daily basis.8. All payroll payments must have a valid employee identification number assigned bythe human resources department at the time of hiring.9. The accounts receivable master is reconciled to the general ledger on a monthly basis.a. For each internal control, identify the type(s) of…arrow_forwardDetermine 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.arrow_forwardControl totals include batch totals, hash totals, and record counts. In a two (2) page response explain which of these totals/counts would be useful in preventing or detecting IT system input and processing errors or fraud described as follows: A payroll clerk accidentally entered the same time card twice. The accounts payable department overlooked an invoice and did not enter it into the system because it was stuck to another invoice. A systems analyst was conducting payroll fraud by electronically adding to his “hours worked” field during the payroll computer run. To create a fictitious employee, a payroll clerk removed a time card for a recently terminated employee and inserted a new time card with the same hours worked.arrow_forward
- The sales of $2,000 made to Shanaya has been posted to the Sara’s account by mistake. It happened because a customer account number was incorrectly entered into the system. Explain what internal control procedure(s) would provide protection against this threat in future?arrow_forwardWhat 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.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_forward
- What internal control or procedure(s) would provide protection against the following threats? A company is late in paying a particular invoice. Consequently, a second invoice is sent, which crosses the first invoice’s payment in the mail. The second invoice is submitted for processing and also paid. A clerical employee obtains a blank check and writes a large amount payable to a fictitious company. The employee then cashes the check A fictitious invoice is received and a check is issued to pay for goods that were never ordered or delivered A purchasing agent adds a new record to the supplier master file. The company does not exist. Subsequently, the purchasing agent submits invoices from the fake company for various cleaning services. The invoices are paid. Cash disbursement department updates account payable once payment is due.arrow_forwardItems 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…arrow_forward5 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_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage