Q1) Your friend, Lisa, plans to open a nail salon.
Lisa states that she does not have time to develop and implement a system of internal controls.
(a) Explain to Lisa the components of internal control.
(b) Explain to Lisa at least 5 internal control procedures she must establish to protect herself against fraud.
You should state specific internal control procedures from the textbook, and relate your answer to her nail salon business
Q2) Following are ratios of 2 companies
Ratio Name Langley Company XYZ Inc.
(c) Accounts receivable turnover 8.3 7.5
(e) Inventory turnover 6.1 5.2
(f) Current ratio 1.96 3.12
(1) Explain the meaning of each of the Langley Company ratios above.
(2) State which company performed better for each ratio. Why
Q3) Strength and Weakness of Internal Controls
Your friend, James, has hired you to evaluate the following internal control procedures.
Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.
For the weaknesses, you also need to state a recommendation for improvement.
(1) Background checks are required.
(2) Paychecks are stored in an unlocked safe.
(3) The Treasurer signs all checks.
(4) The accountant counts the cash and makes the bank deposit.
(5) The company utilizes internal and external auditors.