1. Distinguish between a packing slip, shipping notice, and a bill of lading.
2. List two points in the sales processing system when authorization is required.
3. What specific internal control procedure would prevent the sale of goods on account to a fictitious customer?
4. The clerk who opens the mail routinely steals remittances. Describe a
Specific internal control procedure that would prevent or detect this fraud.
5. When Clipper Mail Order Co. receives telephone and fax orders, the billing department prepares an invoice. The invoice is mailed immediately. A copy of the invoice serves as a shipping notice. The shipping department removes inventory from the warehouse and prepares the shipment. When the order is complete, the goods are shipped. The clerk checks the customer’s credit before recording the sale in the general journal and the account receivable subsidiary ledger. The receptionist opens the mail and lists all payments. The receptionist also handles all customer complaints and prepares sales return forms for defective merchandise. The cashier records all cash receipts in the general journal and makes the appropriate entry in the accounts receivable subsidiary ledger. The cashier prepares the daily bank deposit. Describe at
leas four internal control weaknesses at Clipper Mail Order Co.
6. How may an employee embezzle funds by issuing an unauthorized sales credit memo if the appropriate segregation of functions and authorization controls were not in place?
7. For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: sales order, bill of lading, credit memo.
8. What role does each of the following departments play in sales order processing
subsystem: sales, credit ,and shipping?
9. With regard to segregation of duties, rule one is that transaction authorization and transaction processing should be separated. What does this require in the revenue cycle?
10. For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: remittance advice, remittance list, deposit slip.
11. Differentiate between a purchase requisition and a purchase order?
12. The Soap Manufacturing Company has three employees who work in the warehouse. All of the warehouse workers are authorized to order inventory when it falls below the reorder level. The workers complete a purchase order and mail it to the supplier of their choice. The inventory is delivered directly to the warehouse. The workers send a memo to accounts payable reporting the receipt of inventory. Accounts payable compares the
Warehouse memo to the supplier’s invoice. Accounts payable prepares a check which the treasurer signs. Describe at least five needed internal control improvements.
13. What are the key segregation of duties issues in purchasing and cash disbursements?
14. The Golf Club Company makes custom golf clubs. The manufacturing supervisor interviews people who have specialized manufacturing skills, and he informs payroll when an employee is hired. The employees use a time clock to record the hours they work. The employees are also required to keep a record of the time they spend working on each order. The supervisor approves all time cards. The accountant analyzes the job
Tickets and prepares a labor distribution summary. Payroll prepares the payroll register and paychecks. The supervisor distributes the paychecks to the employees. Payroll informs cash disbursement of the funds required to cover the entire payroll amount.
The cash disbursements clerk ensures that there are adequate funds in the company’s regular checking account to cover the payroll. Describe at least three internal control weaknesses; for each weakness suggest an improvement to internal control.
15. List specific jobs that should be segregated in the cash disbursements system.
