Concept Introduction:
Internal Control:
Internal controls are policies and procedures implemented by an organization to attain operational goals and maintain the integrity of accounting. Internal
Requirement-1:
To Indicate:
The reason how cash theft can be identified using the sales and inventory records.
Concept Introduction:
Internal Control:
Internal controls are policies and procedures implemented by an organization to attain operational goals and maintain the integrity of accounting. Internal Control system has its five integral components those together works an effective internal control.
Requirement-2:
To Indicate:
How an employee can be able to steal cash from sales.
Concept Introduction:
Internal Control:
Internal controls are policies and procedures implemented by an organization to attain operational goals and maintain the integrity of accounting. Internal Control system has its five integral components those together works an effective internal control.
Requirement-3:
To Indicate:
A control procedure to prevent the theft of cash by the employees.
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Chapter 4 Solutions
Cornerstones of Financial Accounting
- Petty cash is used to ________. A. avoid having to use checks frequently B. make small payments C. avoid having to retain receipts because the amounts are very small D. avoid having to get approvals due to the small amount of cash being paidarrow_forwardThere 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_forwardWhat is the advantage of using technology in the internal control system? A. Passwords can be used to allow access by employees. B. Any cash received does not need to be reconciled because the computer tracks all transactions. C. Transactions are easily changed. D. Employees cannot steal because all cash transactions are recorded by the computer/cash register.arrow_forward
- Identify each of the following statements as either true or false. a. A voucher system of control improves internal control of cash pa b. Separation of duties eliminates the possibility of collusion to stea c. Good internal control is to have only one employee be assigned d. A petty cash system of control is a system used only for cash recarrow_forward1. What does it mean to say that internal control has limitations and what are these limitations? 2. Provide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented? 3. What is petty cash and what purpose(s) does it serve? 4. What types of controls should be in place to make sure people in the office don't just take from petty cash (for their own personal use) whenever they feel like it? In your opinion, what is an appropriate amount to have in petty cash? 5. Prepare the necessary journal entries for each of the following: (a) On March 1, issued a check to establish a petty cash fund of $1,410 (b)…arrow_forwardInternal Control Listed below are four potential errors or problems that could occur in the processing of cash transactions. Review each error or problem and using the drop-down box located beneath each one, identify an internal control principle that could reduce the chance of the error or problem occurring. Select "None" if none of the principles will correct the error or problem. 1. Three cashiers use on cash register and the cash in the drawer is often short of the recorded balance. Answer 2. The same employee is responsible for opening the mail, listing any checks received, preparing the deposit receipt, and recording to the accounts receivable journal. Several customers have complained that their balances are incorrect. Answer3. In an effort to save printing costs, generic receipts without numbers are used for customer sales. Answer4. Because things have been hectic, no budgets were prepared this year. One department seems to be doing less volume in revenue, but cost of…arrow_forward
- 1. An example of a detective control in the expenditure cycle is: A. Requiring dual signatures for check payments B. Using firewalls and intrusion detection systems C. Conducting surprise cash counts D. Documenting purchase requisitions 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 invoicesarrow_forwardtrue/false True or False: Control over the receipt of cash sales is best achieved when two or more emloyees participate in each Mailroom personnel of a company should prepare a control listing of incoming cash receipts and deposit them intact The audit of cash requires little audit Cash should be depositedarrow_forwardAccounting 1. The auditor spends significant time auditing cash discounts and sales returns because A. management needs to authorize these transactions. B. these transactions reduce income. C. the materiality is higher. D. the risk of transactions being recorded to conceal stolen cash is higher.arrow_forward
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