1) AFTER reading Chapter 7, answer the questions below. The first part of the chapter focuses on internal control, particularly of CASH. The second half of the chapter focuses on the Bank Reconciliation. You MUST know this for the exam.
2) Upload your TYPED answer. Questions: Consider the following principals of Internal Control: Establishment of responsibility, segregation of duties, documentation, physical-mechanical-electronic controls, independent internal verification, human resource controls.
Pick ONE of the following scenarios and answer: Is there an Internal Control Issue in this situation? What is it? What principles, if any are violated? What are the risks? (Response should be brief, about six sentences).
A small landscaping company buys rocks and lumber. One of the project managers is responsible for ordering the lumber, which he does by calling up the lumber dealer and ordering a shipment over the phone. No purchase order is used. The lumber dealer delivers lumber directly to the job site and invoices the company once a month, on one bill.
“Scrap” is inventory that is broken, either in the warehouse or on the production floor. Rather than discard it, the company has a policy of filling a box up with scrap (metal fitting, clamps, sheet metal). When the box is full, one employee hauls it to the Scrap Dealer, who weighs it, and issues the company a check for the items. Depending upon the weight of the box (determined at the scrap dealer’s), the check amounts vary.
A dedicated bookkeeper rarely, if ever, takes a vacation. She is responsible for paying all of the bills and inputting them into the Accounting System (Quickbooks). She handles the checks, and brings them to the President to sign. She is also responsible for the bank reconciliation.