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of internal controls o 12-22 (OBJECTIVE 12-2) The following are partial descriptions panies engaged in the manufacturing business: 1. When Mr. Clark orders materials, an
of internal controls o 12-22 (OBJECTIVE 12-2) The following are partial descriptions panies engaged in the manufacturing business: 1. When Mr. Clark orders materials, an electronic copy of the purchase order is sent to the receiving department. During the delivery of materials, Mr. Smith, the receiv ing clerk, records the receipt of shipment on this purchase order and then sends the purchase order to the accounting department, where it is used to record materials purchased and accounts payable. The materials are transported to the storage area by forklifts. The additional purchased quantities are recorded on storage records 2. Every day, hundreds of employees clock in using their employee identification cards at Generous Motors Corporation. The data on these time records is used in the prepa ration of the labor cost distribution records, the payroll journal, and the electronic payments and payroll checks. The treasurer, Angela Lee, compares the payroll jour- nal with the payroll records, signs the checks, and returns the payroll notifications and checks to Charles Strode, the supervisor of the computer department. The pay Il checks and payment notices are distributed to the employees by Strode 3. The smallest branch of Connor Cosmetics employs Mary Cooper, the branch manager, and her sales assistant, Janet Hendrix. The branch uses a bank account to pay expenses The account is kept in the name of "Connor Cosmetics-Special Account." To pay expenses, checks must be signed by Cooper or by the treasurer, John Winters. Cooper receives the cancelled checks and bank statements. She reconciles the branch account herself and files cancelled checks and bank statements in her records. She also periodi- List the deficiencies in internal control for each of these situations. To identify the b. For each deficiency, state the type(s) of misstatement(s) that is (are) likely to result. Be cally prepares reports of cash disbursements and sends them to the home offic deficiencies, use the methodology that was discussed in this chapter as specific as possible Required c. How would you improve internal controls for each of the three companies
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