Ndon Company has the following internal control procedures over cash disbursements (ACC 290 Week 5)

ACC 290 Week 5 Assignment

BE7-6 Ndon Company has the following internal control procedures over cash disbursements. Identify the internal control principle that is applicable to each procedure.
(a) Company checks are prenumbered.
(b) The bank statement is reconciled monthly by an internal auditor.
(c) Blank checks are stored in a safe in the treasurer’s office.
(d) Only the treasurer or assistant treasurer may sign checks.
(e) Check signers are not allowed to record cash disbursement transactions.

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What are the major elements of an internal control over property, plant, and equipment?

What are the major elements of an internal control over property, plant, and equipment? For the specific control procedures identified, indicate their importance to the audit.


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(White Collar Crime) Helm Instruction Co. in Maumee, Ohio, makes custom electrical control systems

7-5A. White Collar Crime. Helm Instruction Co. in Maumee, Ohio, makes custom electrical control systems. In September 1998, Helm hired Patrick Walsh to work as comptroller. Walsh soon developed a close relationship with Richard Wilhelm, Helm’s president, who granted Walsh’s request to hire Shari Price as an assistant. Wilhelm was not aware that Walsh and Price were engaged in a extramarital affair. Over the next five years, Walsh and Price spent more than $200,000 of Helm’s money on themselves. Among other things, Walsh drew unauthorized checks on Helm’s accounts to pay his personal credit cards and issued to Price and himself unauthorized salary increases, overtime payments, and tuition reimbursement payments, altering Helm’s records to hide the payments. After an investigation, Helm officials confronted Walsh. He denied the affair with Price, claimed that his unauthorized use of Helm’s funds was an “interest-free loan,” and argued that it was less of a burden on the company to pay his credit cards than to give him the salary increases to which he felt he was entitled. Did Walsh commit a crime? If so, what crime did he commit? Discuss. [State v. Walsh, 113 Ohio App. 3d 1515, 866 N.E.2d 513 (6 Dist. 2007)]


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Companies can gain efficiencies by implementing effective monitoring of their internal control processes

5-42 (Monitoring Activities) Companies can gain efficiencies by implementing effective monitoring of their internal control processes.

Required:
a. Explain the importance of monitoring and provide examples of monitoring.
b. Identify the important monitoring procedures that a company might use in assessing its controls over revenue recognition and costs that might be utilized in each of the following situations:
• A convenience store such as a 7-Eleven
• A chain restaurant such as Olive Garden
• A manufacturing division making rubberized containers for the consumer market
c. Can the auditor focus the assessment of internal control on testing the effectiveness of the company’s monitoring? Discuss and support your conclusion. Discuss, for example, the level of comfort the auditor can get about the effectiveness of other controls by testing the effectiveness of monitoring controls.


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An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting

ACC 225 Week 8

Quick Study Exercise 8-1

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
1. What is the main objective of internal control procedures, and how is it achieved?
2. Why should recordkeeping for assets be separated from custody over the assets?
3. Why should the responsibility for a transaction be divided between two or more individuals or departments?


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For each of these five separate cases, identify the principle of internal control that is violated

ACC 225 Week 8

Problems 8-1B

For each of these five separate cases, identify the principle of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

1. Latoya Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latoya has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.
2. Lake Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.
3. X2U Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.
4. The owner of Super-Aid uses a check protector to perforate checks, making it difficult for anyone to alter the amount of the check. The check protector sits on the owner’s desk in an office
that contains company checks and is often unlocked.
5. LeAnn Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.


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The following control procedures are used in Falk Company for over-the-counter cash receipts

E4-3 The following control procedures are used in Falk Company for over-the-counter cash receipts.

1. Cashiers are experienced; thus, they are not bonded.
2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attache case in the stock room until it is deposited in the bank.
4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.
5. The company accountant makes the bank deposit and then records the day's receipts.

a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
b) For each weakness, suggest a change in the procedure that will result in good internal control


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Which of the following is NOT one of the purposes of internal control?

MULTIPLE CHOICE

1. Which of the following is NOT one of the purposes of internal control? (Points : 1)

2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)

3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)

4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)

5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)

6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)

7. Which of the following is NOT a key element of good internal control? (Points : 1)

8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)

9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)

10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)


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At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account

(Underapplied or overapplied overhead) At the end of 2013, Dub’s Wind Generator Co. had a $40,000 debit balance in its manufacturing overhead control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year end follows:

Work in process inventory finished inventory cost of goods sold
Direct material $20,000 $80,000 $120,000
Direct labor $10,000 $40,000 50.000
Factory overhead 20,000 80,000 100,000
Total 50,000 200,000 270,000

a. What predetermined OH rate was used during the year?
b. Provide arguments to be used for deciding whether to prorate the balance in the overhead account at the year end
c. Prorate the overhead account balance based on the relative balances of the appropriate accounts
d. Identify some possible reasons that the company had a debit balance in the overhead account at the end of the year.

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