FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
9th Edition
ISBN: 9781119595724
Author: Kimmel
Publisher: WILEY C
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Question
Chapter 7, Problem 7.5E
a.
To determine
Internal control: Internal control is a process which ensures continuous reliability of accomplishment of a company’s objectives, related to operations, financial reporting, and in conformity with laws and regulations.
Internal control principles:
- Authorizing the responsibility
- Segregation of duties
- Documenting and recording transactions
- Physical controls
- Periodic independent verification
- Human resource controls
To identify: the weakness in the control procedure and mention the internal control principle violated
b.
To determine
To Recommend: Change in control procedure to attain good internal
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Students have asked these similar questions
The following control procedures are used in Mendy Lang’s Boutique Shoppe for cash disbursements.
1.The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.2.The store manager personally approves all payments before signing and issuing checks.3. Each week, 100 company checks are left in an unmarked envelope on a shelf behind the cash register.4. After payment, bills are filed in a paid invoice folder.5. The company checks are unnumbered.Instructions
(a) For each procedure, explain the weakness in internal control, and identify the internal control principle that is violated.(b) For each weakness, suggest a change in the procedure that will result in good internal control.
7 The following control procedures are used in Parker Company for over-the-counter cash receipts.
Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy.
All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.
The company accountant makes the bank deposit and then records the day's receipts.
To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked briefcase in the stockroom until it is deposited in the bank.
The following control procedures are used in Kelton Company for over-the-counter cash receipts.
(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
Principle Violated
1.
2.
3.
4.
5.
Procedure
Each store manager is responsible for interviewing
applicants for achier jobs. They are hired if they
seem honest and trust worthy.
All-over-the-counter receipts are registered by
three clerks who share a cash register with a single
cash drawer.
To minimize the risk of robbery, cash in excess of
$100 is stored in an unlocked attaché case in the
stock room until it is deposited in the bank.
At the end of each day the total receip are
counted by the cashier on duty and reconciled to
the cash register total.
The company accountant makes the bank deposit
and then records the day's receipts.
Weakness
Chapter 7 Solutions
FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
Ch. 7 - A local hank reported that it lost 150,000 as the...Ch. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 14QCh. 7 - Prob. 15QCh. 7 - Prob. 16QCh. 7 - Prob. 17QCh. 7 - Prob. 18QCh. 7 - Prob. 19QCh. 7 - Prob. 20QCh. 7 - Prob. 21QCh. 7 - Prob. 22QCh. 7 - Prob. 23QCh. 7 - Prob. 24QCh. 7 - Prob. 25QCh. 7 - Prob. 26QCh. 7 - Prob. 27QCh. 7 - Prob. 28QCh. 7 - Match each situation with the fraud triangle...Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - While examining cash receipts information, the...Ch. 7 - Prob. 7.8BECh. 7 - Luke Rove is uncertain about the control features...Ch. 7 - Prob. 7.10BECh. 7 - Prob. 7.11BECh. 7 - Prob. 7.12BECh. 7 - Prob. 7.13BECh. 7 - Prob. 7.15BECh. 7 - Prob. 7.16BECh. 7 - Prob. 7.17BECh. 7 - Prob. 7.1DIECh. 7 - Prob. 7.2DIECh. 7 - Prob. 7.3DIECh. 7 - Prob. 7.4aDIECh. 7 - Prob. 7.4bDIECh. 7 - Prob. 7.1ECh. 7 - Prob. 7.2ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Prob. 7.9ECh. 7 - Prob. 7.10ECh. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.1APCh. 7 - Prob. 7.2APCh. 7 - Prob. 7.1EYCTCh. 7 - Prob. 7.2EYCTCh. 7 - Prob. 7.3EYCTCh. 7 - Prob. 7.4EYCTCh. 7 - Prob. 7.5EYCTCh. 7 - Prob. 7.6EYCTCh. 7 - Prob. 7.7EYCTCh. 7 - Prob. 7.8EYCTCh. 7 - Prob. 7.9EYCTCh. 7 - Prob. 7.1IECh. 7 - Prob. 7.2IE
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Similar questions
- There are several elements to internal controls. Which of the following would not address the issue of having cash transactions reported in the accounting records? A. One employee would have access to the cash register. B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a prenumbered form. C. Ask customers to report to a manager if they do not receive a sales receipt or invoice. D. The person behind the cash register should also be responsible for making price adjustments.arrow_forwardThe following control procedures are used in Danner Company for over-the-counter cash receipts. Cashier are experienced; thus, they are not bonded. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer. To minimize the risk of robbery, cash in excess of P100 is stored in an unlocked attache’ case in the stock room until it is deposited in the bank. At the end of each day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. The company accountant makes the bank deposit and then records the day’s receipts. Each week, Katja leave 100 company checks in a unmarked envelope on a shelf behind the cash register. The store manager personally approves all payments before signing and issuing checks. The company checks are unnumbered. After paying the company’s bills, the disbursing clerk files bills in order. The company accountant prepares a bank reconciliation and reports any discrepancies…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
- Determine whether each cash payment procedure is an internal control strength or weakness. 1. A voucher system is used for all payments of liabilities. 2. The owner of a small business has authority to write and sign checks. 3. When the owner is out of town, the recordkeeper is in charge of signing checks. 4. To save time, all departments are allowed to incur liabilities. 5. Payments over $100 are made by check. 6. Requesting and receiving merchandise are handled by the same department.arrow_forwardWhich of the following is not an appropriate internal control for cash receipts over the counter? A. The cash drawer opens after the store clerk enters a transaction. B. The store clerk deposits the cash in the bank. C. At the end of the day, the manager proves the cash by comparing the cash in the drawer against the machine's record of cash sales. D. A receipt is issued for each transaction to ensure that each sale is recorded.arrow_forwardThe following procedures were recently implemented at Pampered Pets, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. a. At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers. b. At the end of the day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. c. After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. d. Along with the petty cash receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund.arrow_forward
- Match each of the following cash payment activities to the internal control principle to which itbest relates. Enter the appropriate letter in the space provided.1. The business manager has the only key to thecheck-signing equipment.2. The purchasing manager orders all goods andservices for the business.3. A bank reconciliation is prepared monthly.4. Prenumbered checks are used for all payments.5. The company asks suppliers to deliver their merchandise to the warehouse but mail their invoicesto the accounting department.A. Establish responsibilityB. Segregate dutiesC. Restrict accessD. Document proceduresE. Independently verifyarrow_forwardDouglas and Son, Inc., uses the following process for its cash receipts: The company typically receives cash and check sales each day and places them in a single drawer. Each Friday, the cash clerk records the amount of cash received and deposits the money in the bank account. Each quarter, the controller requests information from the bank necessary to prepare a bank reconciliation.Required:Discuss Douglas and Son’s internal control procedures related to cash receipts, noting both weaknesses and strengths.arrow_forwardIdentify the internal control procedures applicable to cash receipts for Ferguson Company in each of the following cases. 1. All cashiers are bonded. Documentation Procedures Physical Controls Segregation of Duties Establishment of Responsibility Human Resource Controls 2. The treasurer compares the total cash receipts to the bank deposit daily. Independent Internal Verification 3. The bookkeeper records cash receipts, which are held by the treasurer. 4. Only the treasurer holds cash receipts. 5. Deposit slips are completed for each deposit.arrow_forward
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