Question
Purpose The purpose of this assignment is for you to become familiar with the practical implementation of a system of internal control. You may one
Purpose
The purpose of this assignment is for you to become familiar with the practical implementation of a system of internal control. You may one day join a start-up company where there are no controls of any kind. You will have to create system of controls which will help ensure the financial statements are prepared fairly in accordance with GAAP.
Once you are familiar with some of the detailed internal controls, you can expect to be tested on these details on your final exam. For example, when you make your middle three submissions, you will be required to describe your systems of controls over cash receipts and cash disbursement. You would be expected to know these controls at a detailed level. You would only be expected to understand controls over inventory at a general level.
Resources
Your main resource is the Professional Engagement Guide.
- See the general list of controls: Under
Templates
1. Engagement Forms
Audits
- Look for # 582 Worksheet Library of typical control activities
- And at some of the detailed audit test forms: e.g. # 545 Control design / implementation Revenues, receivables, receipts
- Look also at:
Core Concepts: Appendices
A2. Components of Internal Control
Somewhere I have some other documents which will be useful but are not needed for the first submission. I will post those to Blackboard.
Required
Throughout this assignment you are to take on the role of advisor to the President of the Lux Candle Company Limited, a small manufacturer of candles. In 2021, they have 80 full time equivalent employees.
a)Describe the general roles of the current employees. How many are assigned to production or service delivery? How many are assigned to management and administrative positions other than accounting? How many (if any) are assigned to accounting roles, and what are those roles?
b)Design a system of controls over payroll. In an organization such as this, you will typically have a weekly payroll for employees paid on an hourly basis and a biweekly payroll for employees paid on a salary. Your system must be appropriate to the size of your organization and the number of employees assigned to accounting
You may wish to use the flowcharting symbols in Excel or Visio to document your control system.
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