The document contains questions about internal controls related to payroll, fixed assets, and other accounting processes. It asks about controls to prevent timeclock fraud, unauthorized distribution of paychecks, theft of unclaimed checks, improper asset depreciation expense allocation, and acquisition of unneeded equipment. It also asks about the purpose of documents used in payroll and fixed asset systems, how those systems differ from expenditure cycles, and controls over authorization, supervision, and verification in fixed asset systems.
The document contains questions about internal controls related to payroll, fixed assets, and other accounting processes. It asks about controls to prevent timeclock fraud, unauthorized distribution of paychecks, theft of unclaimed checks, improper asset depreciation expense allocation, and acquisition of unneeded equipment. It also asks about the purpose of documents used in payroll and fixed asset systems, how those systems differ from expenditure cycles, and controls over authorization, supervision, and verification in fixed asset systems.
The document contains questions about internal controls related to payroll, fixed assets, and other accounting processes. It asks about controls to prevent timeclock fraud, unauthorized distribution of paychecks, theft of unclaimed checks, improper asset depreciation expense allocation, and acquisition of unneeded equipment. It also asks about the purpose of documents used in payroll and fixed asset systems, how those systems differ from expenditure cycles, and controls over authorization, supervision, and verification in fixed asset systems.
The document contains questions about internal controls related to payroll, fixed assets, and other accounting processes. It asks about controls to prevent timeclock fraud, unauthorized distribution of paychecks, theft of unclaimed checks, improper asset depreciation expense allocation, and acquisition of unneeded equipment. It also asks about the purpose of documents used in payroll and fixed asset systems, how those systems differ from expenditure cycles, and controls over authorization, supervision, and verification in fixed asset systems.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 3
1.
Describe an internal control procedure that would prevent an employee from punching the time clock for another, absent employee.
2. Why should the employee's supervisor not distribute paychecks?
3. Describe an internal control procedure that would prevent a supervisor from stealing the unclaimed paychecks of employees who have been terminated.
4. Why should employee paychecks be drawn against a special checking account?
5. Why should employees clocking on and off the job be supervised?
6. What is a personnel action form?
7. In a manufacturing firm, employees typically fill out two different documents regarding their time worked. What are they? Why are there two?
8. List two types of authorization required in the Fixed Asset System.
9. List four types of data that appear on a depreciation schedule.
10. Which documents prompt the fixed asset department to create a fixed asset record?
11. Describe an internal control that would prevent an employee from stealing a computer and then reporting it as scrapped. 12. Describe an internal control that would prevent the payment of insurance premiums on an automobile that is no longer owned by the company.
13. Describe an internal control that would prevent the charging of depreciation expense to the maintenance department for a sweeper that is now located in and used by the engineering department.
14. Describe an internal control that would prevent the acquisition of office equipment which is not needed by the firm.
15. What negative consequences result when fixed asset records include assets that are no longer owned by the firm?
16. Explain the purpose of each of the following documents used in the payroll system: the personnel action form, the job ticket, the time card. 17. How do Fixed Asset Systems differ from the expenditure cycle?
18. What is recorded by the asset maintenance part of the Fixed Asset System?
19. How are the following carried out in the Fixed Asset System: authorization, supervision, independent verification?
20. Which department authorizes changes to employee pay rates?
ESSAY
1. 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.
2. Describe how the Fixed Asset System differs from the expenditure cycle.
3. Three major tasks are handled by the Fixed Asset System. What is the purpose of each? What special control issues affect each?
4. The Baccus Corp. manufactures medical equipment. This is a capital intensive industry and investments in fixed assets exceed $5 million a year. The minimum cost for production equipment is $75,000. When supervisors want new production machinery, they contact the plant manager. The plant manager approves or denies the request based on discussions with the production supervisor, the repair and maintenance supervisor, and the quality control supervisor.
A purchase order is prepared by the purchasing department and sent to one of the three major suppliers of production machinery for medical equipment. The equipment is delivered immediately to the production floor and put into service. At the end of the month, the production supervisor informs the general ledger clerk about the receipt of the machinery. The general ledger clerk establishes an asset record for the machine. At the end of the year, the general ledger clerk computes straight-line depreciation based on a 10-year life with a 10 percent salvage value. Depreciation expense is recorded as a direct reduction of the asset cost. The repair department performs routine maintenance on all of the production equipment. Occasionally the repair department rebuilds a machine to extend its useful life. All of the costs associated with the repair department are charged to manufacturing overhead. When a machine becomes obsolete, production employees move it to a corner of the factory floor and break it down so that parts can be used in other machines. Production employees routinely remove parts for personal use. Some smaller machines have disappeared completely from the factory floor.
The general ledger clerk takes a physical inventory every three years. About 75 percent of the fixed assets can be located and identified. Other assets have serial numbers that are inaccessible, so the item cannot be matched to a fixed asset record. Some fixed asset records cannot be traced to an actual item. Several machines that have been scrapped and are being used for spare parts were matched to fixed asset records. At the last inventory, the general ledger clerk did not make any adjustments to the fixed asset records explaining that 75 percent accuracy in the fixed asset physical inventory was excellent.
Describe five internal control weaknesses and explain how to correct them.
5. Why does the payroll process lend itself to batch processing?
6. Discuss the fundamental risk and control issues associated with fixed assets that are different from raw materials and finished goods.
7. Outline the key steps taken in a payroll system that deals with hourly workers who are paid once each week.
