a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Foms and used it to send invoices to Walt Company for business documents that Walt never ordered or re- ceived. Farrell prepared receiving reports that stated that the business documents had been received. Walt's controller compared the receiving reports to the invoices and paid cach one. b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the bank's closing hours to deposit them in the night depository slot. A creative thief had placed a sign on the slot saying it was out of order and all deposits should be placed in a metal canister placed next to the building. Walt's employee placed the deposit in the canister and left. Employ- ees from two other companies did the same thing. Later that night, the thief returned and stole the deposits from the canister. (This is an actual case.) c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier pocketed cash receipts and destroyed all copies of the related sales invoices. Required For each situation, describe any violations of good internal control procedures and identify the steps that you would take to prevent each situation.

Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance
Section: Chapter Questions
Problem 4CYBK
icon
Related questions
Question

Please solve all the questions with a detailed explanation. Each sub-division should contain two parts which are answer and explanation.

P7-1B. Internal Control Walt Company encountered the following situations:
LO2, 4
a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Forms
and used it to send invoices to Walt Company for business documents that Walt never ordered or re-
ceived. Farrell prepared receiving reports that stated that the business documents had been received.
Walt's controller compared the receiving reports to the invoices and paid each one.
b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the
bank's closing hours to deposit them in the night depository slot. A creative thief had placed a
sign on the slot saying it was out of order and all deposits should be placed in a metal canister
placed next to the building. Walt's employee placed the deposit in the canister and left. Employ-
ees from two other companies did the same thing. Later that night, the thief returned and stole the
deposits from the canister. (This is an actual case.)
c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier
pocketed cash receipts and destroyed all copies of the related sales invoices.
Required
For each situation, describe any violations of good internal control procedures and identify the steps
that you would take to prevent each situation.
Transcribed Image Text:P7-1B. Internal Control Walt Company encountered the following situations: LO2, 4 a. Jenny Farrell, head of the receiving department, created a fictitious company named Speedy Forms and used it to send invoices to Walt Company for business documents that Walt never ordered or re- ceived. Farrell prepared receiving reports that stated that the business documents had been received. Walt's controller compared the receiving reports to the invoices and paid each one. b. Walt Company lost one day's cash receipts. An employee took the receipts to the bank after the bank's closing hours to deposit them in the night depository slot. A creative thief had placed a sign on the slot saying it was out of order and all deposits should be placed in a metal canister placed next to the building. Walt's employee placed the deposit in the canister and left. Employ- ees from two other companies did the same thing. Later that night, the thief returned and stole the deposits from the canister. (This is an actual case.) c. Walt Company does not prenumber the sales invoices used for over-the-counter sales. A cashier pocketed cash receipts and destroyed all copies of the related sales invoices. Required For each situation, describe any violations of good internal control procedures and identify the steps that you would take to prevent each situation.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Domestic transfer pricing
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L…
Auditing: A Risk Based-Approach (MindTap Course L…
Accounting
ISBN:
9781337619455
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q…
Auditing: A Risk Based-Approach to Conducting a Q…
Accounting
ISBN:
9781305080577
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
South-Western College Pub