...Chapter 4 Cash and Internal Controls Answer true-or-false questions about occupational fraud (LO1) E4-1 Below are several statements about occupational fraud. 1. For most large companies, occupational fraud is minimal and internal controls procedures are unnecessary. 2. Managers have a variety of reasons for manipulating the numbers in financial statements, such as maximizing their compensation, increasing the company’s stock price, and preserving their jobs. 3. Internal control procedures include formal policies and procedures related to (1) safeguarding the company’s assets and (2) improving the accuracy and reliability of accounting information. 4. “Cooking the books” is a phrase used by accountants to indicate the preparation of financial statements that are free of manipulation. 5. Most occupational fraud cases involve misuse of the company’s resources. 6. Common types of financial statement fraud include creating fictitious revenues from a phantom customer, improperly valuing assets, hiding liabilities, and mismatching revenues and expenses. Required: State whether the answer to each of the statements is true or false. Answer true-or-false questions about the Sarbanes-Oxley Act (LO1) E4-2 Below are several statements about the Sarbanes-Oxley Act (SOX). 1. SOX represents legislation passed in response to several accounting scandals in the early 2000s. 2. The requirements outlined in SOX apply only to those companies expected to have weak internal...
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...weaknesses in internal control over cash disbursements at Idaho Company are; 1. Checks are not pre-numbered, 2. More than one person is authorized to issue checks, 3. Unissued checks are not locked in a safe or locked cabinet. My recommendations to improve company procedures for internal control over cash disbursements are; there should only be one specified individual such as a treasurer authorized to sign checks. There should never be two people authorized for check signing. Make sure to assign a different person to each of these tasks; 1. Approving items for payment, 2. Paying the items, 3. Recording the payment. Use pre-numbered checks and accounting for all checks, with each check supported by an approval invoice. Always store blank checks in a safe or a locked cabinet or drawer with restricted access and use a machine to print the amounts on the checks. Compare each check with the approved invoice before issuing the check and make monthly reconciliations of bank and book balances. After payment stamp each approved invoice paid. The principles of internal control are; establishment of responsibility, segregation of duties, documentation procedures, physical, mechanical, and electronic controls, independent internal verification, and other controls. Now that Guard dog company’s checks are pre-numbered and they are using the new check writer these two things fall under Documentation procedures and physical, mechanical and electronic controls. There new procedures...
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...The following is a list of weakness in internal control over cash disbursements Idaho Company present: • Placing unissued check in an unsecure place. The checks are placed in an unlocked file cabinet. • Checks are not prenumbered. • There is only one process of check approval • There is no second verification on mathematical accuracy of the vendor’s invoice. • There is only one person conducting reconciliation of the account there should be a second person verifying that the numbers are correct to avoid discrepancies. Memo to Idaho Company: I would highly recommend that the company invest in a safe to place the unissued checks. At the same time, it would be beneficial to purchase checks that are prenumbered to keep better track of them when conducting recordkeeping. The safe should be place in a room where the purchasing agent and the treasurer has access to the checks. At the same time, they are responsible for verifying any checks written. I also recommend that in addition of the stamped place on each of copy of paid invoices to add a date and check number used to pay the invoice. Creating the changed would reduce the possibility of having misplaced checks and it would also protect the company’s assets. In addition, I recommend to improve the current verification process of vendor’s invoices and reconciliation of the accounts it is important to ensure that a second person other than the one conducting the job to perform a second verification of the results. This would...
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...E4-5 A) This weaknesses in internal control over cash disbursements is the many people who have access to the un-issued checks. The checks should be in a vault or safe with restricted access and only authorized personnel with access. Another weakness in internal control over cash disbursements is that the Idaho Company uses checks that are not pre-numbered. Idaho’s Company should use checks that are numbered as well as imprinted with the amount in inedible ink. This can cause some major errors in a company because there is no way to track for any missing checks, or to know if a previous check was written with out knowledge. Another weakness is that there is one person who approve item payments, pay and record items and this should be distributed to different individual to ensure accuracy. B) MEMO To: Melissa Weigl From: Cassandra Gloria CC: Idaho Company Date: 1/31/2010 Re: Internal Cash Control Idaho Company has done well in the internal cash control, although there were some areas I have come to analyze that need improvements. The first improvement I will suggest is that the checks become pre- numbered, and with approved invoice. This is important in a company because the checks that are being distributed need to be able to be tracked. The company should also imprint the checks with inedible ink to avoid an unauthorized personnel to change the amount. Un-issued checks should also be placed in a secured vault or safe with restricted access to ensure that only authorized...
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...AN EVALUATION OF THE INTERNAL CONTROLS SYSTEM FOR CASH FOR THE CASE OF NAIROBI SMALL BUSINESSES BY CLEOPHAS MUSINGA A Management Research Project Submitted In Partial Fulfillment For The Requirements Of The Award Of Bachelor Of Commerce (BCOM), School Of Business, University Of Nairobi JULY, 2008 DECLARATION This research project is our own original work and has not been submitted for academic purposes in any institution of higher leaning. Name Number Sign CLEOPHAS MUSINGA D33/6646/05 ………………………….. This research project has been submitted for examination with my approval as the university supervisor Signed……………………………. Date…………………………………………. Mr. Abdulatif Essajee Lecturer University of Nairobi TABLE OF CONTENTS DECLARATION i CHAPTER ONE 1 INTRODUCTION 1 1.1 Background of the study 1 1.2 Statement of the problem 5 1.3 Objectives of the study 6 1.4 Research questions 6 1.5 Scope of the study 6 1.6 Justification of the study 7 CHAPTER TWO 9 LITERARURE REVIEW 9 2.1 Evolution of internal controls 9 2.2 Components of Internal Controls 12 2.4 Relationship between a firm’s age and internal control 18 2.6 Internal controls in small businesses 19 CHAPTER THREE 21 RESEARCH METHODOLOGY 21 3.1 Research design 21 3.2 Population 21 3.3 Sample and Sampling Technique 21 3.4 Data collection methods 22 3.5 Data analysis 22 CHAPTER FOUR 23 DATA ANALYSIS AND FINDINGS 23 4.1 Introduction...
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...|[pic] |Application Form | This application form is available in other formats upon request. It is in 3 parts: parts 1 and 3 contain personal information and are confidential documents, which will only be seen by Human Resources; part 2 relates specifically to the post you are applying for and will be seen by those making selection decisions. Please refer to the Guidance Note for information about completing the Application Form. Part 1 Personal Information |Job(s) title |Job(s) reference number |Application reference number (for British Council | | | |use only) | |Customer service advisor |15593 | | Eligibility to work at the British Council (see guidance notes) |Are you currently legally entitled to work in | Yes No | |the country where the job is based? | | |If applicable, please detail any restrictions...
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...The four types of consumer offerings are: convenience offerings, shopping offerings, specialty offerings, and unsought offerings. Convenience offerings are products or services that are common and are pretty much the same as others like them. Since they are all about the same, consumers don’t usually put very much effort in to finding a specific brand, they just purchase the product or service that they see first. An example of this would be chewing gum products. Shopping offerings are where the consumer will shop for the best product or service they are looking for as far as price and quality. They are going to buy the product or service that is the lowest in price but also meets their wants and needs. When it comes to shopping offerings, brands are very important as the consumer is looking for the best brand out there. An example of this would be a car wash service. Specialty offerings are offerings that are usually marketed differently than other products or services as they are more difficult to come by and more expensive than regular products or services. Specialty offerings may also only be available in certain places and not all over the place for convenient purchase. An example of this would be cosmetic products that are only available for purchase in stores. Unsought offerings are product or services that consumers don’t buy until they are in need of it. Some unsought products or services are available to be prepaid on so that the consumer will be prepared for the...
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...Cash Control Wilmington University June 28, 2015 This paper was prepared for Leadership Development and Change Management MGT 6503 Week 7 Final Project: Cash Control Cash Control In an organization as large as the healthcare system I work for, each clinical department has their own financial group consisting of a Chief Financial Officer and a Director who is supported by two to three accountants. To name a few, some of these many clinical departments are OBGYN, Ophthalmology, Medicine, Radiation Oncology, Dermatology, Surgery, Family Medicine, Neurology and Radiology. All together, the health system is organized into about twenty clinical departments (excluding non-clinical departments such as advertising, accounts payable, legal, human resource, etc) that report to corporation’s centralized Finance department. Some of Finance’s many duties are to book journal entries that are often generic to all departments and review all the submitted P&L from each department. Once the reviews and analyses are completed, the Centralized Finance team consolidates all of the financial statements for the organization as one. My department (OBGYN, Obstetrics & Gynecology) is made up of both full time and part time employees. The department has about eighty physicians and an additional three hundred employees supporting the work of the physicians. The other supporting staff members include practice managers& supervisors, nurses...
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...Week 4: Internal Control, Cash, and Receivables - Class Activity 1. | Which one of the following is not a primary component of an internal control system? A. | Risk assessment | B. | Information and communication | C. | Monitoring | D. | Rationalization | | 2. | Which of the following is not a reason why an organization establishes a system for internal control? A. | To safeguard its assets | B. | To increase efficiency of operations | C. | To ensure compliance with laws and regulations | D. | All of these are reasons why an organization establishes a system for internal control. | | 3. | Which of the following statements is correct? A. | Control is most effective when two or three people are given responsibility for the same task. | B. | The person who has custody of assets should not perform the record keeping for the assets. | C. | The person who has custody of assets should also perform the record keeping for the assets. | D. | It is often a waste of company resources to have an employee perform independent internal verification. | | 4. | Internal auditors A. | are hired by CPA firms to audit business firms. | B. | are employees of the IRS who evaluate the internal controls of companies filing tax returns. | C. | evaluate the system of internal controls for the companies that employ them. | D. | cannot evaluate the system of internal controls of the company that employs them because they are not independent. | | 5. | Segregation...
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...the theater’s control lacking? The company is lacking at the control environment system- the overall governance of the company which has been developed by the top level of the organisation. It comprises of i. Corporate culture ii. Ethics iii. Quality of people to be hired iv. And how the company is controlled. Are the controls themselves weak or incomplete, or are the theater’s problem caused primarily because of lack of disciplines in using the existing controls? The controls in the theatre is weak or incomplete i. Taking their jobs for granted: failed to collect cash from known customers; lead to conflict of interest; fail to identify the ticket carefully; either wrong dates or colors. ii. Misuse the power and authority given: give free tickets to customers that he likes by signing on the tickets; didn’t conduct any supervision on his employees. iii. No proper segregation of duties: the one who record the sales also the one who collect the cash. 3. Identify the control improvements you would suggest for Leo’s Four-Plex: Establish code of conduct a. Set up basic principles for employees to understand what is expected and follow the rules b. Manager should take responsibility to set up the code of conduct Monitoring employees work a. Hire someone to supervise the employees work b. Eg: checking the cash register twice per day at the refreshment stand to avoid failure of the stand attendants to collect cash Segregation...
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...MAHARASHTRA STATE BOARD OF TECHNICAL EDUCATION (Autonomous) (ISO/IEC - 27001 - 2005 Certified) __________________________________________________________________________________________________ Subject Code: 0815 SUMMER – 13 EXAMINATION Model Answer Page No: 1/ 25 Important Instructions to examiners: 1) The answers should be examined by key words and not as word-to-word as given in the model answer scheme. 2) The model answer and the answer written by candidate may vary but the examiner may try to assess the understanding level of the candidate. 3) The language errors such as grammatical, spelling errors should not be given more Importance (Not applicable for subject English and Communication Skills). 4) While assessing figures, examiner may give credit for principal components indicated in the figure. The figures drawn by candidate and model answer may vary. The examiner may give credit for any equivalent figure drawn. 5) Credits may be given step wise for numerical problems. In some cases, the assumed constant values may vary and there may be some difference in the candidate’s answers and model answer. 6) In case of some questions credit may be given by judgement on part of examiner of relevant answer based on candidate’s understanding. 7) For programming language papers, credit may be given to any other program based on equivalent concept. MAHARASHTRA STATE BOARD OF TECHNICAL EDUCATION (Autonomous) (ISO/IEC - 27001 - 2005 Certified) __________...
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...A budget is a quantitative expression of the money inflows and outflows that reveal whether a financial plan will meet the organisational objectives or as a quantitative plan of action relating to a given period of time which may include planned revenues, expenses, assets, liabilities and cashflows. Business budgeting is one of the most powerful financial tools available to any small-business owner. Put simply, maintaining a good short- and long-range financial plan enables you to control your cash flow instead of having it control you. Budgeting is a quantitative expression of a plan or action prepared in advance of the period to which it is related. Budget sets out the costs and revenues that are expected to be incurred or earned in future period. Budgeting is one of the most important skills that you can have. In any economic forecast, planning and budgeting are crucial when it comes to conserving and increasing your resources. The use of a budget can be helpful to not only individuals and families, but companies as well. In order to stay afloat, every company from the small business to the large corporation must keep track of their finances in order to succeed. Often they utilize the services of an accounting professional to keep this information in order. However if you are the owner of a small business or simply trying to deal with your home finances, you may not have the luxury of hiring a professional and need to do the work on your...
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...on the January through June 2010 cash budget, what is the maximum monthly loss during the six-month planning period? What is the maximum cumulative borrowing balance? (For purposes of this question, disregard any interest payments on short-term bank loans or interest received from investing surplus funds.) Maximum monthly loss is in June: -$60,750. The maximum cumulative borrowing balance is $99,000 in February. What does the monthly cash budget reveal that indicates it should probably be extended beyond the original six months’ horizon? The major cash shortfall in June and the seasonality inherent in the firm’s business indicate that a full year’s cash budget should be developed. The monthly cash budget assumes that cash flows occur simultaneously. This is not realistic, of course. Assume, more realistically, that cash outflows occur early in the month and cash inflows occur later in the month. What do you think would happen to the current cash budget’s predictive powers? (NOTE: This question should be answered without preparing a spreadsheet; it is a ‘thought’ question.) The monthly cash budget would understate the need for funds, since outflows would occur before inflows. If you identified any issues in #3 above, what do you think would resolve them? HINT: There is a specific answer I am expecting, short and sweet, and it is in the case study narrative. Use a daily cash budget to predict cash flows. The need for cash could then be more precisely forecasted...
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...Attempt Any Four Case Study Case 1: Zip Zap Zoom Car Company Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment. It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability. Its financial statements are shown in Exhibits 1 and 2 respectively. The company enjoys the confidence of its shareholders who have been rewarded with growing dividends year after year. Last year, the company had announced 20 per cent dividend, which was the highest in the automobile sector. The company has never defaulted on its loan payments and enjoys a favorable face with its lenders, which include financial institutions, commercial banks and debenture holders. The competition in the car industry has increased in the past few years and the company foresees further intensification of competition with the entry of several foreign car manufactures many of them being market leaders in their respective countries. The small car segment especially, will witness entry of foreign majors in the near future, with latest technology being offered to the Indian customer. The Zip Zap Zoom’s senior management realizes the need for large scale investment in up gradation of technology and improvement of manufacturing facilities to pre-empt competition. Whereas on the one hand, the competition in the car industry has been intensifying, on the other hand, there has been a slowdown in the Indian economy, which...
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...Brazos 1. What is Brazos’ investment strategy? Does it seem well suited for its position as a first-time fund? How do you assess the merits of the GTT transaction? Brazos’ investment strategy emphasizes buyouts of mid-size companies that show predictable cash flows, have good management teams in place, have well-developed niche markets, and are located in Texas and the Southwest. This strategy suits its position as a first-time fund because this geographic area is underserved by LBO firms. Additionally, the existence of dependable cash flow and management make it easier to acquire debt financing and increase leverage. GTT offered merits for both sellers and Brazos. It gave sellers a way to cash out if they desired, while allowing them to retain significant equity ownership. The structure of this deal also delayed taxation until shares were liquidated. It gave Brazos minority ownership with significant board representation, supermajority rights to block major changes, and the right to take control of the board in the case of severe underperformance. 2. How has the current recessionary climate affected Brazos’ investment strategy, in both favorable and unfavorable ways? Favorable: Brazos’ strategy matched well with new strategies in the industry, including investing in smaller companies, establishing a specialty investment focus (niches), developing operating expertise to aid the companies after acquisition (good management), and diversifying geographically (TX and...
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