Question
P8-22A. Correcting internal control weakness. Each of the following situations has an internal control weakness. a. Upside-Down Applications develops custom programs to customers specifications. Recently,
P8-22A. Correcting internal control weakness. |
Each of the following situations has an internal control weakness. |
a. Upside-Down Applications develops custom programs to customers specifications. |
Recently, development of a new program stopped while the programmers |
redesigned Upside-Downs accounting system. Upside-Downs accountants |
could have performed this task. |
b. Norma Rottler has been your trusted employee for 24 years. She performs all |
cash-handling and accounting duties. Ms. Rottler just purchased a new Lexus |
and a new home in an expensive suburb. As owner of the company, you wonder |
how she can afford these luxuries because you pay her only $30,000 a year and |
she has no source of outside income. |
c. Izzie Hardwoods, a private company, falsified sales and inventory figures in |
order to get an important loan. The loan went through, but Izzie later went |
bankrupt and could not repay the bank. |
d. The office supply company where Pet Grooming Goods purchases sales |
receipts recently notified Pet Grooming Goods that its documents were not |
pre-numbered. Howard Mustro, the owner, replied that he never uses receipt |
numbers. |
e. Discount stores such as Cusco make most of their sales in cash, with the |
remainder in credit card sales. To reduce expenses, one store manager ceases |
purchasing fidelity bonds on the cashier. |
f. Cornelius Corndogs keeps all cash receipts in an empty box for a week because he |
likes to go to the bank on Tuesdays when Joann is working. |
Requirements |
1. Identify the missing internal control characteristics in each situation. |
2. Identify the possible problem caused by each control weakness. |
3. Propose a solution to each internal control problem. |
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