Dunbar Camera Manufacturing, Inc. is a manufacturer of high-priced precision motion picture cameras in which the specifications of component parts are vital to the manufacturing process. Dunbar buys valuable camera lenses and large quantities of sheetmetal and screws. Screws and lenses are ordered by Dunbar and are billed by the vendors on a unit basis. Sheetmetal is ordered by Dunbar and billed by the vendors on the basis of weight. The receiving clerk is responsible for documenting the quality and quantity of merchandise received.

Your understanding of the internal control structure indicates that the following procedures are being followed:

Receiving. Information from properly approved purchase orders, which are prenumbered, is stored in the computer. The receiving clerk has access to all the information on the purchase order sent to the vendor. The receiving clerk records receipts of merchandise on a computer form that matches the purchase order.

Sheetmetal. The company receives sheetmetal by railroad. The railroad independently weighs the sheetmetal and reports the weight and date of receipt on a bill of lading (waybill), which accompanies all deliveries. The receiving clerk only checks the weight on the waybill against purchase order information in the computer.

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

Camera lenses. Each camera lens is delivered in a separate corrugated carton. Cartons are counted as they are received by the receiving clerk, and the number of cartons in compared to purchase order information in the computer.

Required

Explain why the internal control procedures as they apply individually to receiving reports and the receipts of sheetmetal, screws, and camera lenses are adequate of inadequate. Do not discuss recommendations for improvements.

For inadequacies in internal controls describe the financial statement misstatements that may arise, and describe how they may occur.