130. Identify each of the following as relating to (a) the control environment, (b) risk assessment, or (c) control procedures.
1. Mandatory vacations
2. Personnel policies
3. Report of outside consultants on future market changes
1. (c) control procedures
2. (a) the control environment
3. (b) risk assessment
131. Distinguish preventive controls from detective controls and give examples of each as they relate to cash.
132. List the objectives of internal control and give an example of how each is implemented.
Internal control provides reasonable assurance that
(1)assets are safeguarded and used for business purposes
(2)business information is accurate
(3)employees comply with laws and regulations
133. You began your new job as the accountant at Bolivar Industries during the month of December. During your first month, you found several interesting issues.
1) While looking through the invoices, you found Invoices 23-57, 60-95, and 99-110. It appears that invoices 58, 59, 96, 97, and 98 are missing.
2) During the month, Clerk # 2 issued $300 in refunds as compared to Clerks #1, #3, and #4 who issued less than $30 each.
3) The daily cash receipts and bank deposits reconcile, except on Tuesdays during the month.
4) Business is generally brisk during the holiday season, but two weeks before Christmas there was a sudden increase in slow payments.
REQUIRED:
Part A: What kind of warning signs could be associated with these issues?
Part B: What control could you put in place regarding cash refunds mentioned in Part A (2)?
134. The following procedures were recently implemented at the Health Station, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, explain why.
(a) All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts.
(b) The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer’s office for approval.
(c) At the end of each day, all cash receipts are placed in the bank’s night depository.
(d) The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.