Unit 5 Assignment 1 - Running Head Unit 5 Assignment 1 1...

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Running Head: Unit 5 Assignment 1 1 Unit 5 Assignment 1 Ryan Tackett August 30, 2015 Ac 410 Professor Beiser
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Unit 5 Assignment 1 2 Question 10-27 Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $937 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $937 payable to himself, forged the treasurer's signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: Identify the weaknesses in Signet Corporation's internal control. Explain several audit procedures that might disclose the fraudulent disbursement. Identify the weaknesses in Signet Corporation's internal control. Signet Corporation’s biggest flaw is the lack of separation of duties. One man controls the reconciliations, disbursements, and checks. The reconciliations should always be created by an employee not directly dealing with cash transaction. If these procedures were in place than the forged check problem never occurs. The other major weakness for Signet is that the checks have to time limit to them. If checks remain outstanding for long periods, internal control over cash disbursements is weakened. Employees who become aware that certain checks have long been outstanding
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