1.
Introduction: Internal control is a procedure for ensuring that an organization's objectives in operational effectiveness and efficiency, accurate financial reporting, and compliance with laws, rules, and policies are met, according to the definitions of accounting and auditing. Internal control is a comprehensive notion that encompasses all aspects of risk management for a company.
To identify: The principle(s) of internal control that is violated.
2.
Introduction: Internal control is a procedure for ensuring that an organization's objectives in operational effectiveness and efficiency, accurate financial reporting, and compliance with laws, rules, and policies are met, according to the definitions of accounting and auditing. Internal control is a comprehensive notion that encompasses all aspects of risk management for a company.
The recommendations to adhere to principles of internal control in each case.
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FINANCIAL AND MANAGERIAL ACCOUNTING
- What 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_forwardYou are the auditor for Konerko’s Office Supply Store, which is opening for business next week. The store owner has established all the controls you have recommended for ensuring that sales are recorded properly and cash is accounted for. The owner has heard from other small business owners that employees often used returned goods as means of skimming money from the register. a. How might an employee use returned goods to skim money from the register? b. What controls would you recommend to prevent or detect fraudulent returns? c. What audit procedures might you perform to detect fraudulent returns?arrow_forwardThe internal control procedures in Philips Company make the following provisions. Identify the principles of internal control that are being followed in each case. Employees who have physical custody of assets do not have access to the accounting records. Each month the assets on hand are compared to the accounting records by an internal auditor. A prenumbered shipping document is prepared for each shipment of goods to customers. All over-the-counter receipts are registered on cash registers. All cashier are bonded. Daily cash counts are made by Cashier department supervisors. The Duties of receiving cash, recording cash, and having custody of cash are assigned to different individuals. Only Cashier may operate cash registers. Company checks are prenumbered. The bank statement is reconciled monthly by an internal auditor. Blank checks are stored in a safe in the treasurer’s office. Only the treasurer or assistant treasurer may sign checks. Checks signers are not allowed to record cash…arrow_forward
- Lenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation. In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747. In the audit of sales, one of the…arrow_forwardLenter Supply Company is a medium-sized distributor of wholesale hardware supplies in the central Ohio area. It has been a client of yours for several years and has instituted excellent internal controls for sales at your recommendation. In providing control over shipments, the client has prenumbered “warehouse removal slips” that are used for every sale. It is company policy never to remove goods from the warehouse without an authorized warehouse removal slip. After shipment, two copies of the warehouse removal slip are sent to billing for the computerized preparation of a sales invoice. One copy is stapled to the duplicate copy of a prenumbered sales invoice, and the other copy is filed numerically. In some cases, more than one warehouse removal slip is used for billing one sales invoice. The smallest warehouse removal slip number for the year is 11741 and the largest is 34687. The smallest sales invoice number is 45302 and the largest is 65747. In the audit of sales, one of the…arrow_forwardThe company XYZ suffers from numerous weaknesses in its internal control system. For each the below situations, you are required to identify the anomaly/risk related to this system and propose eventual solutions. The financial department issues one copy of the sales bill that is shipped to the customer with the company The inventory custodian is the person who deliver the merchandise to the The person who keep the checks (issued and received) is the same who have access to the company accounting system. A has now 9 years experience in the company. He is responsible to keep cash and checks. Since he joining XYZ , he has not claim any vacation. The financial manager prepares the checks for the company suppliers and receive the merchandises ordered by the The company XYZ has recently installed an ERP system to manage all its activities . Different staff have access to this system. Mr X is working…arrow_forward
- Charles Hart, an accounts payable clerk, is an hourly employee. He never works a minute past 5 P.M. unless the overtime has been approved. Charles has recently found himself faced with some severe financial difficulties. He has been accessing the system from his home during the evening and setting up an embezzlement scheme. As his boss, what control technique(s) discussed in lectures network risks and auditing could you use to help detect this type of fraud?arrow_forwardSergio Flores works at the drive-through window of Big & Bad Burgers. Occasionally, when a drive-through customer orders, Sergio fills the order and pockets the customer’s money. He does not ring up the order on the cash register.Identify the internal control weaknesses that exist at Big & Bad Burgers anddiscuss what can be done to prevent this theft.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,Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage