Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Chapter 4, Problem 4.3E
To determine
Control activities: Control activities are more concerned about the protection of the resources of the company. They could be either Preventive Controls which aim to prevent the frauds or Detective Controls which aim at finding out the frauds which happened earlier.
To State: Whether the answer for the given statements are true or false.
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Below are several statements about internal controls.1. The components of internal control are built on the foundation of the ethical tone set by top management.2. Once every three months, managers need to review operations to ensure that control procedures work effectively.3. Collusion refers to the act of a single individual circumventing internal control procedures.4. Detective control procedures are designed to detect errors or fraud that have already occurred, while preventive control procedures are designed to keep errors or fraud from occurring in the first place.5. Fraud committed by top-level employees is more difficult to detect because those employees more often have the ability to override internal control features.6. A good example of separation of duties would be having one person collect cash from customers and account for it, while having another person order inventory and maintain control over it.7. Employee tips historically have been the most common means of…
The best way to enact a broad fraud prevention program is toa. Install airtight control systems of checks and supervision.b. Name an “ethics officer” who is responsible for receiving and acting on fraud tips.c. Place dedicated hotline telephones on walls around the workplace with direct communication to the company ethics officer.d. Practice management “of the people and for the people” to help them share personal and professional problems.
The best way to enact a broad fraud prevention program is toa. Install airtight control systems of checks and supervision.b. Name an ethics officer who is responsible for receiving and acting upon fraud tips.c. Place dedicated hotline telephones on walls around the workplace with direct communication to the company ethics officer.d. Establish a corporate culture conducive to ethical behavior in the workplace
Chapter 4 Solutions
Financial Accounting
Ch. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - What is meant by the fraud triangle, and what can...Ch. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - What is meant by separation of duties?Ch. 4 - Prob. 10RQ
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17RQCh. 4 - Prob. 18RQCh. 4 - Prob. 19RQCh. 4 - Prob. 20RQCh. 4 - Prob. 21RQCh. 4 - 22.What are two primary reasons that the companys...Ch. 4 - Prob. 23RQCh. 4 - Prob. 24RQCh. 4 - Prob. 25RQCh. 4 - Prob. 26RQCh. 4 - Prob. 27RQCh. 4 - Describe the operating, investing, and financing...Ch. 4 - Prob. 29RQCh. 4 - Prob. 30RQCh. 4 - Prob. 4.1BECh. 4 - Match each of the following components of internal...Ch. 4 - Prob. 4.3BECh. 4 - Prob. 4.4BECh. 4 - During the year, the following sales transactions...Ch. 4 - Prob. 4.6BECh. 4 - Prob. 4.7BECh. 4 - Prob. 4.8BECh. 4 - Prob. 4.9BECh. 4 - Prob. 4.10BECh. 4 - Prob. 4.11BECh. 4 - Prob. 4.12BECh. 4 - Prob. 4.13BECh. 4 - Prob. 4.14BECh. 4 - Prob. 4.15BECh. 4 - On January 12, Ferrell Incorporated obtains a...Ch. 4 - Prob. 4.17BECh. 4 - Prob. 4.18BECh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Below are several amounts reported at the end of...Ch. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10ECh. 4 - Prob. 4.11ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Below are cash transactions for Goldman...Ch. 4 - Prob. 4.17ECh. 4 - Prob. 4.18ECh. 4 - Consider the following information: 1.Service...Ch. 4 - Prob. 4.20ECh. 4 - Prob. 4.1APCh. 4 - Prob. 4.2APCh. 4 - Prob. 4.3APCh. 4 - Prob. 4.4APCh. 4 - Prob. 4.5APCh. 4 - Prob. 4.1BPCh. 4 - Prob. 4.2BPCh. 4 - Prob. 4.3BPCh. 4 - Prob. 4.4BPCh. 4 - Prob. 4.5BPCh. 4 - Prob. 4.1APCPCh. 4 - Prob. 4.2APFACh. 4 - Prob. 4.3APFACh. 4 - Prob. 4.4APCACh. 4 - Prob. 4.5APECh. 4 - Prob. 4.7APWC
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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
- A good fraud prevention program should address employees’ motivation to steal from the company. The best method for doing this is toa. Establish employee assistance programs.b. Require a fidelity bond on all employees.c. Require reconciliations of all accounts to be reviewed by a supervisor.d. Ensure that all accounts with high inherent risk of fraud are audited.arrow_forwardSegregation of Duties (SOD) is a basic building block of sustainable risk management and internal controls for a business. Which of the following statements is not a segregation of duties violation?A. The duties of Internal IT Developer of company is to write application programs and then perform required program maintenance when a problem occurs.B. The payroll administrator is distributing payroll checks to employees and recording cash receipts in the journal under supervision.C. The accounting clerk who recording cash receipts in the journal in the general ledger performs bank reconciliation to compare if there are any differences between cash transactions.D. The inventory warehouse clerk task is to maintain the inventory records with custody of physical assets inventory to manage asset identification, location and condition Explain why you choose your answer, and not the other (in max 200 words)arrow_forwardThe impact of weak internal controls can affect an employee’s fraud behavior. The role of information technology (IT) controls facilitate and help detect fraud. Design a method from the accounting information system (AIS) readings to help eliminate such employee fraud activity. Chapter 3 in your textbook discusses the need for a code of ethics and internal controls.arrow_forward
- A code of ethics is an important element of a fraud prevention program. Which of the following would diminish the effectiveness of a company’s code of conduct?a. The establishment of a chief ethics officer.b. The establishment of a hotline for reporting unethical behavior.c. The violation of the code of ethics by senior management.d. The posting of the code of ethics in the company workplace.arrow_forwardAndy is a junior accounts clerk. Andy has the responsibility of keying transactions into the accounting information system. Andy also has the authorization and sanctions to post those journal entries into the ledger. Required: Identify the risk(s) in the situation and assess what and how controls can be deployed to this situation.arrow_forwardAndy is a junior accounts clerk. Andy has the responsibility of keying transactions into the accounting information system. Andy also has the authorization and sanctions to post those journal entries into the ledger. Identify the risk(s) in the situation and assess what and how controls can be deployed to this situation.arrow_forward
- a) Internal controls play an important role in reducing the risks of fraudulent activities in any organization. Further, advanced technology helps accountants in reducing fraud. Explain how an advanced technology transaction processing system reduces fraudulent activities from any organizing. b) Refer to the given system flowchart, and we have discussed the control weakness and the risk associated with these control weaknesses. Based on these control weaknesses and the associated risk, what types of frauds are possible in this business environment. Sales Department Accounting Department Warehouse Shipping Department Slock Release Packing Packing Customer Sales Order Release Packing Customer Order Reconcle Packing sip and Sales order, send Camier Record in Shipping AR Sub Ledge Pick Goods Update Inventory send goods Shipping Bi Customer Approves cred, prepare Update Accounts Inventory Sub ledger Sales documents Shipping Log AR Control Sales Order Stock Release Packing Sip Sales Stock…arrow_forwardIndicate the COSO component that matches with each of the following internal control activities. Internal control activities a. Reporting of control effectiveness. b. Analyses of fraud risk factors. c. Implementation of policies to reduce risk of internal control failure. d. Executives' strong ethics. COSO componentsarrow_forwardWhen a fraud has occurred within an organization, management must decide what follow-up action (s) to take. Briefly describe the three follow-up alternatives available to organizations?arrow_forward
- Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits is least likely to occur?a. reduction of cost of an external auditb. prevention of employee collusion to commit fraudc. availability of reliable data for decision-making purposesd. some assurance of compliance with the Foreign Corrupt Practices Act of 1977e. some assurance that important documents and records are protectedarrow_forwardThe IT auditor can MOST (select one) effectively help a company deal with increasing IT-related risk by: a) Alerting management and the Audit Committee of the risks related to IT, and making audit recommendations that are focused on the root cause. b) Performing a weekly review of system-based audit logs to determine if the company has been breached. c) Ensuring that the company has a log-in banner that warns unauthorized users that they may be subject to criminal prosecution and penalties. d) Conducting an audit of the company's network security and pointing out weak firewall configuration settings in the audit report.arrow_forwardAn assistant on the Carter Company audit has been working in the revenue cycle and has compiled a list of possible errors and fraud that may result in the misstatement of Carter Company’s financial statements and a corresponding list of controls that, if properly designed and implemented, could assist in preventing or detecting the errors and fraud. For each possible error and fraud numbered a through o, select one internal control from the following answer list that, if properly designed and implemented, most likely could assist management in preventing or detecting the errors and fraud. Each response in the list of controls may be selected once, more than once, or not at all. A. Shipping clerks compare goods received from the warehouse with the details on the shipping documents. B. Approved sales orders are required for goods to be released from the warehouse. C. Monthly statements are mailed to all customers with outstanding balances. D. Shipping clerks compare…arrow_forward
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