Assignment
1. (a) Name and describe the five elements of internal control. (b) Is any one element of internal control more important than another?
2. Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records? Explain.
3. The ticket seller at a movie theater doubles as a ticket taker for a few minutes each day while the ticket taker is on a break. Which control procedure of a business's system of internal control is violated in this situation?
4. Why should the responsibility for maintaining the accounting records be separated from the responsibility for operations? Explain.
5. Assume that Brooke Miles, accounts payable clerk for West Coast Design Inc., stole $48,350 by paying fictitious invoices for goods that were never received, The clerk set up accounts in the names of the fictitious companies and cashed the checks at a local bank, Describe a control procedure that would have prevented or detected the fraud.
6. Before a voucher for the purchase of merchandise is approved for payment, supporting documents should be compared to verify the accuracy of the liability. Give an example of supporting documents for the purchase of merchandise.
7. The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?
8. What is the purpose of preparing a bank reconciliation?
9. Knott Inc. has a petty cash fund of $750. (a) Since the petty cash fund is only $750, should Knott Inc. implement controls over petty cash? (b) What controls, if any, could be used for the petty cash fund?
10: (a) How are cash equivalents reported in the financial statements? (b) What are some examples of cash equivalents?