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ACC 305 Week 3 Judgment
Case 7-5
Judgment Case 7-5 on
page 391
For each of the
following independent situations, indicate the apparent internal control
weaknesses and suggest alternative procedures to eliminate the weaknesses.
1. John Smith is the
petty cash custodian. John approves all requests for payment out of the $200
fund, which is replenished at the end of each month. At the end of each month,
John submits a list of all accounts and amounts to be charged and a check is
written to him for the total amount. John is the only person ever to tally the
fund.
2. All of the company’s
cash disbursements are made by check. Each check must be supported by an
approved voucher, which is in turn supported by the appropriate invoice and,
for purchases, a receiving document. The vouchers are approved by Dean Leiser,
the chief accountant, after reviewing the supporting documentation. Betty
Hanson prepares the checks for Leiser’s signature. Leiser also maintains the
company’s check register (the cash disbursements journal) and reconciles the
bank account at the end of each month.
3. Fran Jones opens the
company’s mail and makes a listing of all checks and cash received from
customers. A copy of the list is sent to Jerry McDonald who maintains the
general ledger accounts. Fran prepares and makes the daily deposit at the bank.
Fran also maintains the subsidiary ledger for accounts receivable, which is
used to generate monthly statements to customers.
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