Case 1 Steve Ramos owns apartment buildings in Baguio City, and Tagaytay City. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property managers transfer cash to Ramos monthly and prepare their own bank reconciliations. The manager in Baguio City has been stealing large sums of money. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than Ramos actually has in the bank. In negotiating the sale of the Baguio City property, Ramos is showing the balance sheet to prospective investors.
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- Southern Company pays its employees weekly by issuing checks on its regular bank account. The owner thinks it would be too much trouble to have a second checking account. Explain to the owner why having this account might be worth the additional effort.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.Steve Ramos owns apartment buildings in Baguio City, and Tagaytay City. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property managers transfer cash to Ramos monthly and prepare their own bank reconciliations. The manager in Baguio City has been stealing large sums of money. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than Ramos actually has in the bank. In negotiating the sale of the Baguio City property, Ramos is showing the balance sheet to prospective investors. 1. Identify two parties other than Ramos who can be harmed by this theft. In what ways can they be harmed? 2. Discuss the role accounting plays in this situation.
- Steve Ramos owns apartment buildings in Baguio City, and Tagaytay City. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property managers transfer cash to Ramos monthly and prepare their own bank reconciliations. The manager in Baguio City has been stealing large sums of money. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than Ramos actually has in the bank. In negotiating the sale of the Baguio City property, Ramos is showing the balance sheet to prospective investors. Based on Case 3, identify two parties other than Ramos who can be harmed by this theft. In what ways can they be harmed?ACC Snake Creek Company has one trusted employee who, as the owner said, handles all of the book-keeping and paperwork for the company. This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit, preparing checks for major expenditures (signed by the owner), making small expenditures from the cash register for daily expenses, and collecting accounts receivable. The owners asked the local bank for a $ 20,000 loan. The bank asked that an audit be performed covering the year just ended. The independent auditor ( a local CPA), in a private conference with the owner, presented some evidence of the following activities of the trusted employee during the past year: a. Cash sales sometimes were not entered in the cash register, and the trusted employee pocketed approximately $ 50 per month. b. Cash taken from the cash register (and pocketed by the trusted employee) was replaced with expense memos with fictitious…D. J. Fletcher, a trusted employee of Bluestem Products, found himself in personal financial dif-ficulties and decided to “borrow” $3,000 from the company and to conceal his theft. As a first step, Fletcher removed $3,000 in currency from the cash register. This amount repre-sented the bulk of the cash received in over-the-counter sales during the three business days since the last bank deposit. Fletcher then removed a $3,000 check from the day’s incoming mail; this checkhad been mailed in by a customer, Michael Adams, in full payment of his account. Fletcher madeno journal entry to record the $3,000 collection from Adams, but deposited the check in BluestemProducts’s bank account in place of the $3,000 over-the-counter cash receipts he had stolen.In order to keep Adams from protesting when his month-end statement reached him, Fletchermade a journal entry debiting Sales Returns and Allowances and crediting Accounts Receivable—Michael Adams. Fletcher posted this entry to the two general…
- Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $937 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $937 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: Identify the weaknesses in Signet Corporation’s internal control. Explain several audit procedures that might disclose the fraudulent disbursement.Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $9,370 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $9,370 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: a. Identify the weaknesses in Signet Corporation’s internal control. b. Explain several audit procedures that might disclose the fraudulent disbursement.Goldie and Kate operate a small clothing store that has annual revenues of about $100,000. The company has established the following procedures related to cash disbursements: The petty cash fund consists of $10,000. Employees place a receipt in the fund when making expenditures from it and obtain the necessary cash. For any expenditure not made with the petty cash fund, the employee writes a check. Employees are not required to obtain permission to write a check but are asked to use good judgment. Any check written for more than $5,000can be signed only by Goldie or Kate. Required:Discuss Goldie and Kate’s internal control procedures related to cash disbursements, noting both weaknesses and strengths.
- 1. Jane is a cashier at Lulu Ltd a fast-food outlet in Kang. She receives a lot of cash from customers for cash sales. Serving a lot of customers each time makes it difficult for her to record cash promptly. Her cousin does the banking of cash on her behalf every Saturday. Sunday is her resting day. She sometimes asks her brother, who is doing a certificate in accounting at a local college, to help her with bank reconciliation. As she is not familiar with accounting, she normally files the bank reconciliation without questions. Identify, from the above scenario, the risks and control objectives relating to cash. State the controls needed to deal with the identified risks.What is wrong in the following scenario?Jack O.A. Trade is an accountant is a small enterprise. Aside from keeping the books and preparing the financial statements, he is also in charge of removing and counting the cash from the cash register at the end of each day; comparing the cash with the duplicate sales slips used for recording cash sales; and depositing the cash with the enterprise' depository bank the next banking day. His duties also include releasing checks to the suppliers which he could sign in the absence of the owner and preparing the bank reconciliation statement at the end of each month.BASE OFF OF THE INFORMATION, CAN SOMEONE HELP ME SET UP A T-TABLE? Sheridan Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.The balance per the bank statement on October 31, 2020, was $17,920. Outstanding checks were No. 62 for $160.20, No. 183 for $191, No. 284 for $275.25, No. 862 for $211.40, No. 863 for $232.00, and No. 864 for $182.60. Included with the statement was a credit memorandum of $116.00 indicating the collection of a note receivable for Daisey Company by the bank on October 25. This memorandum has not been recorded by Daisey.The company’s ledger showed one Cash account with a balance of $21,910.00. The balance included undeposited cash on…