Question
Please read the narrative below for the Expenditure cycle. You will need to evaluate the company's internal controls for the expenditure cycle and make the
Please read the narrative below for the Expenditure cycle. You will need to evaluate the company's internal controls for the expenditure cycle and make the recommendation that best mitigates this problem.
Amy is a consultant hired by the CEO of Jensen's Sports Equipment Company. This company orders and sells sports equipment to individual, government, and corporate customers. After talking to the accounting department, Amy has documented the following processes that currently occur at Jensen's:
The Jensen company has a separate Purchasing department that issues Purchase Order's (PO's) for items needed to maintain an adequate level of stock in inventory for sale. The purchasing employees issue a PO based off department purchase requisitions. Most of the time, the purchase agents use a vendor list to purchase stock. There are a few times though when the suppliers do not have the stock and the purchasing agents will go onto google to find a supplier who can deliver the items within the "need by" date. If they are happy with the quality of goods from this supplier, they will add them to their list for next time. The purchasing department sends a copy of the PO to the warehouse and to accounting. When the goods are received in the warehouse, the receiving employees receive the shipment and inspects the goods. They securely store the goods in the warehouse and add it to the receiving report that goes to accounting at the end of the week. Once the vendor invoice is received, the accountant will check the receiving report to confirm it was received and then pays the vendor invoice by check. The general ledger posting for both the vendor invoice and check posts on the check date. The checks are only signed by the owner of the company. The bank reconciliation is done by the Sr. Accountant who is not involved in custody, recording, or authorization duties of the expenditure cycle.
After further discussions with the accounting staff, they have mentioned that in the that the warehouse seems to have high levels of items that the company doesn't seem to use. Amy also noticed that the accounting department has a file drawer full of Purchase Orders and the accounting staff wasn't sure what to do with them. In addition, a few times they noticed that the vendors returned their payments because the invoice was already paid.
Required: Identify the 5 internal control problems that are specific to this scenario (2 pts each) meaning that if it is not mentioned, then do not assume that the problem exists. In addition, make 5 recommendations that best mitigates each problem (2 pts each). The evaluation is an open book (Ch 11), open note, individual problem.
Your answer should be in a format listing out the 5 issues/recommendations as follows:
- IC Problem
IC Recommendation
- IC Problem
IC Recommendation
Etc.
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