Judging the Adequacy of Control Procedures Dunbar Camera, Inc., manufactures high-priced motion picture cameras for the movie industry. The component parts specifications are vital to the filmmaking process. Dunbar buys valuable camera lenses and large quantities of sheet metal and screws. Vendors bill screws and lenses on a unit basis, and sheet metal on the basis of weight. The receiving clerk is responsible for documenting the quality and quantity of all merchandise received. A preliminary review of internal control indicates the following procedures:

• Receiving report. Approved purchase orders are prenumbered and filed numerically.

The copy sent to the receiving clerk is an exact duplicate of the copy sent to the vendor. The receiving clerk records the receipt of merchandise on the purchase order copy.

• Sheet metal. The company receives sheet metal by rail. The rail company weighs the sheet metal independently, and reports both the weight and receipt date on the bill of lading that accompanies deliveries. The receiving clerk agrees the weight on the bill of lading to the purchase order.

• Screws. The receiving clerk opens cartons containing screws, and inspects and weighs the contents. The weight is converted to number of units by conversion charts. The receiving clerk then agrees the computed quantity to the purchase order.

• Camera lenses. Each camera lens is delivered in a separate corrugated carton.

Cartons are counted as they are received by the receiving clerk, who agrees the number of cartons to the purchase order.

Required:

1. Explain why the control procedures for receiving reports and the receipt of sheet metal, screws, and camera lenses, respectively, are adequate or inadequate.

2. For each inadequate procedure you identify, describe misstatements that might appear in the financial statements.