H103 A B C D G H 125 Question 3-Internal controls and cash (21 marks). 126 A) (5 marks). Write the control activity violated in each of the following situations, using the numbers 1 to 5. Control activities 127 128 1. Assignment of responsibility 129 2. Segregation of duties 130 3. Documentation IM 4. Physical controls 132 5. Review and reconciliation 133 ' K 1. M N 0 P R 134) Blue Link, a fast-growing company, did not insure inventory in some of its new stores from theft and damage from fire. 135) Williams has been named "the employee of the year" for 10 consecutive years at his place of employment. His supervisor rarely reviews his work 136 because of his honesty, loyalty and dedication to work. 137) The cash register tape shows sales of $6,250 while cash on hand at the end of day was $6,200. Henry and Jane both operated the register which has 138 a single drawer. 139 v) Some of the serially numbered sales invoices are missing 140 ) Clarence, an inventory clerk at TelMon Ltd, is responsible for taking physical bount of inventory and keeping store records. 141 142 143 B) (5 marks). Match each situation with the fraud triangle factor (pressure, opportunity or rationalization) that best describes it by entering the code letter in the 144 space provided below 145 146 147 148 149 Fraud triangle factor P-Pressure O-Opportunity R- Rationalization 150 ) "I will take the cash, use it to pay for my son's surgery and pay it back next month. If I don't take the cash, my son may die." 151 ii) To avoid violating loan covenants, management fodges with the numbers in the financial statements. 152) Everyone knows that employees' passwords is their lastname and the first three letters of their first name. 155 iv) Salespeople are reminded on a weekly basis that they will only receive a bonus if they meet the sales target Shost New H103 A B C D E F G H ' K L M N 0 P 2 43 B) (5 marks). Match each situation with the fraud triangle factor (pressure, opportunity or rationalization) that best describes it by entering the code letter in the 44 space provided below 45 Fraud triangle factor 46 47 148 149 P-Pressure O-Opportunity R-Rationalization 150 i) "I will take the cash, use it to pay for my son's surgery and pay it back next month. If I don't take the cash, my son may die." 151 ii) To avoid violating loan covenants, management fudges with the numbers in the financial statements. 152 iii) Everyone knows that employees' passwords is their lastname and the first three letters of their first name. 153 iv) Salespeople are reminded on a weekly basis that they will only receive a bonus if they meet the sales target 154 v) Sandra has been handling the company's accounts payables for the past 12 years. Because she rarely makes material errors, her supervisor reviews her 155 work few times in a year. 156