Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Question
Chapter 8, Problem 3E
To determine
To identify the strength or weakness and the internal control principle followed or violated.
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Students have asked these similar questions
Exercise 6-3 (Algo) Internal control strengths and weaknesses LO C1
Determine whether each procedure described below is an internal control strength or weakness; then identify the internal control principle violated or followed for each procedure.
An employee cannot approve their own request for purchases of inventory.
Several salesclerks share the same cash drawer.
Employees that handle easily transferable assets such as cash are bonded.
The company devotes resources towards keeping accurate accounting records for machinery.
The company saves money by having employees involved in operations perform the only review of internal controls.
Multiple-Choice Questions
8. Which situation indicates a weak internal controlstructure?a. the AR clerk authorizes the write off of baddebtsb. the record-keeping clerk maintains both ARand AP subsidiary ledgersc. the inventory control clerk authorizes inventory purchasesd. the AR clerk prepares customer statements every month
Determine whether each procedure described below is an internal control strength or weakness; then identify the internal control principle violated or followed for each procedure. 1. The same employee requests, records, and makes payment for purchases of inventory. 2. The company saves money by having employees involved in operations perform the only review of internal controls. 3. Time is saved by not updating records for use of supplies. 4. The recordkeeper is not allowed to write checks or initiate EFTs. 5. Each salesclerk is in charge of her own cash drawer.
Chapter 8 Solutions
Principles of Financial Accounting.
Ch. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQ
Ch. 8 - Which of the following assetsinventory, building,...Ch. 8 - What is a petty cash receipt? Who should sign it?Ch. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 1QSCh. 8 - COSO internal control components C1 COSO lists...Ch. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - Prob. 5QSCh. 8 - Prob. 6QSCh. 8 - Prob. 7QSCh. 8 - Prob. 8QSCh. 8 - Prob. 9QSCh. 8 - Prob. 10QSCh. 8 - Prob. 11QSCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 1APCh. 8 - Prob. 2APCh. 8 - Prob. 3APCh. 8 - Prob. 4APCh. 8 - Prob. 5APCh. 8 - Prob. 1BPCh. 8 - Prob. 2BPCh. 8 - Prob. 3BPCh. 8 - Prob. 4BPCh. 8 - Prob. 8SPCh. 8 - Prob. 1AACh. 8 - Prob. 2AACh. 8 - Prob. 3AACh. 8 - Prob. 1BTNCh. 8 - Prob. 2BTNCh. 8 - Prob. 3BTNCh. 8 - Prob. 4BTNCh. 8 - Review the opening feature of this chapter that...Ch. 8 - Prob. 6BTN
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Similar questions
- 14-22 (Objectives 14-2, 14-3) The following questions deal with internal control and audit evidence in the sales and collection cycle. Choose the best response. Tracing shipping documents to sales invoices provides evidence that sales billed to customers were actually shipped. shipments to customers were properly invoiced. Shipments to customers were recorded as sales. All goods ordered by customers were shipped. Which of the following procedures most likely represents an internal control designed to reduce the risk of errors in the billing process? Comparing control totals for shipping documents with corresponding totals for sales invoices. Matching receiving documents with approved sales orders before invoice preparation. Reconciling the control totals for sales invoices with the accounts receivable subsidiary ledger. Requiring customers that purchase on account to be approved by the credit department. An auditor wishes to test the completeness assertion for sales. Which of the…arrow_forward14-22 (Objectives 14-2, 14-3) The following questions deal with internal control and audit evidence in the sales and collection cycle. Choose the best response. Tracing shipping documents to sales invoices provides evidence that sales billed to customers were actually shipped. shipments to customers were properly invoiced. Shipments to customers were recorded as sales. All goods ordered by customers were shipped. Which of the following procedures most likely represents an internal control designed to reduce the risk of errors in the billing process? Comparing control totals for shipping documents with corresponding totals for sales invoices. Matching receiving documents with approved sales orders before invoice preparation. Reconciling the control totals for sales invoices with the accounts receivable subsidiary ledger. Requiring customers that purchase on account to be approved by the credit department.arrow_forwardIdentifying and correcting internal control weakness Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, the office manager, is designing the internal control system. Regal proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write-offs of uncollectible receivables: The credit department runs a credit check on all customers who apply for credit. When an account proves uncollectible, the credit department authorizes the write- off of the accounts receivable. Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts. The controller compares the daily deposit slip to the total amount posted to customer accounts.…arrow_forward
- Which of the following related to a company’s control procedures? (1) Separating responsibilities for related operations (2) Safeguarding inventory in a locked storeroom (3) Identifying a sudden increase in slow payments (4) Operating style of management (5) Requiring employees to take vacations a.1, 3, and 5 b.1, 2, and 3 c.1, 2, and 5 d.1, 2, and 4arrow_forwardMultiple-Choice Questions 6. Which of the following is NOT an independentverification control?a. The shipping department verifies that the goodssent from the warehouse are correct in typeand quantity.b. General ledger clerks reconcile journal vouchers that were independently prepared in various departments.c. The use of prenumbered sales orders.d. The billing department reconciles the shippingnotice with the sales invoice to ensure that customers are billed for only the quantitiesshipped.arrow_forward1. The primary objective of internal controls in the expenditure cycle is to: A. Ensure the accuracy and completeness of financial transactions B. Streamline the procurement process C. Minimize the cost of purchases D. Increase the speed of payment processing 2. A threat in the expenditure cycle that involves unauthorized individuals making purchases is known as: Unauthorized access Fraudulent disbursements Data breaches Inventory theft 3.arrow_forward
- 1. A threat to the expenditure cycle that involves an employee creating and approving fictitious purchase orders is known as: A. Inventory theft B. Unauthorized access C. Check tampering D. Billing schemes 2. Purchase orders are used to initiate a payment in the disbursement cycle. True or False 3.Vendor audits are conducted to address the threat of unauthorized access in the disbursement cycle. True or falsearrow_forwardIdentifying internal controls Consider each situation separately. Identify the missing internal control procedure from these characteristics: Assignment of responsibilities Separation of duties Audits Electronic devices Other controls (specify) a. While reviewing the records of Quality Pharmacy, you find that the same employee orders merchandise and approves invoices for payment. b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold. c. The same trusted employee has served as a cashier for 12 years. d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on…arrow_forwardQUESTION 2 (a). ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment requires auditors to obtain an understanding of control activities relevant to the audit. Control activities are the policies and procedures which help ensure that management directives are carried out. Required: Describe FOUR different types of control activities and, for each type, provide an example of control a company may implement. (b) Diamond Medical Company manufactures nose mask and hand sanitizer. Its main customers are retailers who then sell to the general public. The company’s manufacturing is spread across five sites and goods are stored in its nine warehouses located across the country. You are an audit supervisor of Reynolds & Associate and in preparation for the forthcoming audit for the year ending 30 June 2019, you are reviewing the following notes your audit manager has provided you with in relation to the company’s internal…arrow_forward
- A. Occurrence B. Completeness C. Rights and obligationsD. Allocation or valuationE. ClassificationF. ExistenceG. CutoffH. AccuracyI. UnderstandabilityFor each of the following control activities, identify the management assertion that best applies by placing the correct letter in the blank space below.___ 1. Match shipping documents with sales invoices before a sale is recorded.___ 2. Balance total of individual customers' receivables with the control account.___ 3. Sales manager approves taking discounts.___ 4. Computer check for billing the quantity shipped, list price, and total.___ 5. Account for numerical sequence of pre-numbered shipping documents.arrow_forward4. SEGREGATION OF DUTIES Explain why each of the following combinations of tasks should or should not be separated to achieve adequate internal control. a. Approval of bad debt write-offs and the reconcil- iation of the AR subsidiary ledger and the GL control account b. Distribution of payroll checks to employees and approval of employee time cards. c. Posting of amounts from both the cash receipts and the cash disbursements journals to the gen- eral ledger. d. Writing checks to vendors and posting to the cash account. e. Recording cash receipts in the journal and pre- paring the bank reconciliation.arrow_forward1. The primary objective of internal controls in the expenditure cycle is to: A. Ensure the accuracy and completeness of financial transactions B. Streamline the procurement process C. Minimize the cost of purchases D. Increase the speed of payment processing 2. An example of a preventive control in the expenditure cycle is: A.Requiring management approval for large purchases B. Regular inventory counts C. Using firewalls and intrusion detection systems D. Conducting vendor audits 3. Which of the following is an example of a processing control in the expenditure cycle? A. Document sequencing B. Reconciling the bank statement C. Physical controls over inventory D. Approval of vendor invoices 4. Purchase orders are used to initiate a payment in the disbursement cycle.True False 5. An automated approval workflow for payment processing eliminates the need for managerial oversight and authorization. True or Falsearrow_forward
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