CHAPTER 8 - CHAPTER8 EXERCISE81 1 Establishment of...

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CHAPTER 8 SOLUTIONS TO EXERCISES EXERCISE 8-1 1. Establishment of responsibility. The counter clerk is responsible for handling cash. Other employees are responsible for making the pizzas. 2. Segregation of duties. Employees who make the pizzas do not handle cash. 3. Documentation procedures. The counter clerk uses your order invoice (ticket) in registering the sale on the cash register. The cash register produces a tape of all sales. 4. Physical, mechanical, and electronic controls. A cash register is used to record the sale. 5. Independent internal verification. The counter clerk, in handling the pizza, compares the size of the pizza with the size indicated on the order. 6. Other controls. No visible application possible. EXERCISE 8-2 (a) (b) Procedure Weakness Principle Recommended Change 1. Cash is not adequately pro- tected from Physical, mechanical, and electronic controls. Cash should be stored in a safe until it is deposited in
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theft. bank. 2. Inability to establish responsibility for cash with a specific clerk. Establishment of responsibility. There should be separate cash drawers and register codes for each clerk.
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EXERCISE 8-2 (Continued) (a) (b) Procedure Weakness Principle Recommended Change 3. The accountant should not handle cash. Segregation of duties. The cashier’s department should make the deposits. 4. Cash is not independently counted. Independent internal verification. A cashier office supervisor should count cash. 5. Cashiers are not bonded. Other controls. All cashiers should be bonded. EXERCISE 8-3 (a) (b) Procedure Weakness Principle Recommended Change 1. The bank reconciliation is not inde- pendently pre- pared. Independent internal verification. Someone with no other cash responsibilities should prepare the bank reconciliation. 2. The approval and payment of bills is done by the same indi- vidual. Segregation of duties. The store manager should approve bills for payment and the treasurer should sign and issue checks.
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3. Checks are not stored in a secure area. Physical, mechanical, and electronic controls. Checks should be stored in a safe or locked file drawer.
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EXERCISE 8-3 (Continued) (a) (b) Procedure Weakness Principle Recommended Change 4. Filing does not prevent a bill from being paid more than once. Other controls. Bills should be stamped PAID after payment. 5. Checks are not prenumbered. Documentation procedures. Checks should be prenumbered and subsequently accounted for. EXERCISE 8-4 (a) Weaknesses (b) Suggested Improvement 1. Checks are not prenumbered. Use prenumbered checks. 2. The purchasing agent signs checks. Only the treasurer’s department personnel should sign checks. 3. Unissued checks are stored in unlocked file cabinet. Unissued checks should be
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This note was uploaded on 04/04/2009 for the course ACC 321 taught by Professor Ahmedmokhtar during the Spring '09 term at Ain Shams University.

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CHAPTER 8 - CHAPTER8 EXERCISE81 1 Establishment of...

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