Week-2 Case Study
ACCT504 Acct Fin: Managerial Use Analysis
Callistus Wong
Professor Saad
November 27, 2015

Situation A. In evaluating the internal control over inventory for the Williams Oil Services Company, an auditor learns that the warehouse receiving clerk is responsible for ordering parts for supply inventory use in drilling services, counts the inventory when received at the dock, records the receipts into the inventory ledger, and takes the annual inventory, No supervisor reviews the receiving clerk’s work.
Missing Internal Control Characteristic:
The important missing factor is that same person is responsible for conducting all the activities of inventory. He is responsible for ordering parts, counting the inventory, recording inventory ledger and taking up of annual stock.
Problem of the Firm:
The firm is not having any internal control mechanism to check the authenticity of documents and physical inventory of stores. Same person who might encourage any person to commit a willful fraud is performing all the duties.
Proposed Solution:
Segregation of duties is one of the methods of internal which helps in preventing and reducing the occurrence of frauds and errors. It is done by segregating the duties in a department and by ensuring that no single person is having control on all the transactions.
Duties are divided into four general categories:
Authorization
Record keeping
Custody
Reconciliation.
Different employees should perform all these major functions and a separate person should be responsible for his acts.
Situation b:
Nicole Lopez handles employee travel and expense reports for Scott Sales Services. With the growth in the economy, the sales team began traveling extensively gaining new business. Because of the heavy volume, she no longer required the sales team to provide original airline, hotel, or car rental receipts. She told