.Internal Controls and RiskReview the following description of the purchasing and AP procedures for a company and answer the questions at the end.The purchasing agent receives an inventory status report on his computer terminal from the inventory control application, which identifies the items that need to be reordered. The agent selects the suppliers and enters this information into the computer terminal to create a digital purchase order. He then prints and sends a copy of the PO to the supplier.When the goods are received directly into the warehouse, the warehouse manager counts and inspects them. The manager then creates a digital receiving report and updates the inventory subsidiary ledger from the warehouse terminal.A few days later, the supplier sends an invoice to the AP clerk who reconciles it with the digital copy of the receiving report. From her computer terminal, the clerk records the purchase in the purchases journal and records the liability by adding a record to the AP subsidiary ledger and assigning a due date.Each day, the cash disbursement clerk visually searches the AP subsidiary ledger from her terminal for invoices that are due to be paid. The clerk prepares the check and records it in the digital check register. The negotiable portion of the check is mailed to the vendor, and a check copy is filed. The clerk then closes the liability in the AP subsidiary ledger to mark the liability paid.Required1. Identify the internal control weaknesses in this system.2. Describe the uncontrolled risks that result from these weaknesses.

Question
Asked Sep 27, 2019
5 views

.Internal Controls and Risk
Review the following description of the purchasing and AP procedures for a company and answer the questions at the end.
The purchasing agent receives an inventory status report on his computer terminal from the inventory control application, which identifies the items that need to be reordered. The agent selects the suppliers and enters this information into the computer terminal to create a digital purchase order. He then prints and sends a copy of the PO to the supplier.
When the goods are received directly into the warehouse, the warehouse manager counts and inspects them. The manager then creates a digital receiving report and updates the inventory subsidiary ledger from the warehouse terminal.
A few days later, the supplier sends an invoice to the AP clerk who reconciles it with the digital copy of the receiving report. From her computer terminal, the clerk records the purchase in the purchases journal and records the liability by adding a record to the AP subsidiary ledger and assigning a due date.
Each day, the cash disbursement clerk visually searches the AP subsidiary ledger from her terminal for invoices that are due to be paid. The clerk prepares the check and records it in the digital check register. The negotiable portion of the check is mailed to the vendor, and a check copy is filed. The clerk then closes the liability in the AP subsidiary ledger to mark the liability paid.
Required
1. Identify the internal control weaknesses in this system.
2. Describe the uncontrolled risks that result from these weaknesses.

check_circle

Expert Answer

Step 1

1.

The internal control weaknesses of this system are listed below:

  • The inventories are received directly to warehouse for inspections instead of received by receiving department for physical inspection.
  • The inventory subsid...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Accounting Information Systems

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Applying and Analyzing Inventory Costing MethodsAt the beginning of the current period, Chen carried...

A: Solution:

question_answer

Q: Whats P&G's accounting policy related to advertising? whats accounting principle does P&G fo...

A: Procter & Gamble, commonly known as P&G is an Amercian multinational consumers good corporat...

question_answer

Q: How do you prepare a income statement for month ended May 31st?

A: The income statemement shows all the revenues earned and expenses incurred during the month and the ...

question_answer

Q: How Is He Doing? Ted Mohr had worked as a mid-level manager for a large retail chain with a regional...

A: Income Statement of Mohr’s BusinessNote:The amount of taxes, insurance, repair and depreciation at $...

question_answer

Q: Nichols Company had the following items that required adjustment at December 31, 2013. Required: 1. ...

A: 1. Prepare the adjusting entries:

question_answer

Q: I asked this question yesterday and received my answer.. I am stuck on how to calculate the present ...

A: Prepare journal to record sale of land:

question_answer

Q: Identify each of the following costs as either a product cost or a period cost. Factory maintenance ...

A: Period costs: These costs are not related to inventory, hence, they are not added to inventory costs...

question_answer

Q: Mr. A owns all of the interests in a limited liability company (LLC) that customizes accounting soft...

A: Revenue recognition is a generally accepted accounting principle that determines the conditions when...

question_answer

Q: Section c

A: (c) Partial balance sheet of Bramble Corporation: