Exam_I_Fall_2006 - ACCOUNTANCY 321 Fall 2006 EXAM I I What...

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ACCOUNTANCY 321 Fall, 2006 EXAM I I. What Internal Control procedure would provide protection against the following threats? You MUST relate the controls to the specific scenario in each part (that is, answers such as “separation of duties,” are NOT correct). (2 points each) A. Theft of goods by the shipping dock workers who claim that the inventory shortages reflect errors in the inventory records. B. Authorizing a credit memo for a sales return when the goods were never actually shipped. C. Billing customers for the quantity ordered when the quantity shipped was actually less, due to back ordering of some items. D. Theft of checks by the mailroom clerk who then endorsed the checks for deposit into the clerk’s personal bank account. E. Theft of cash by a waiter who destroyed the customer sales ticket for customers who paid cash. F. Shipping goods to a customer but then failing to bill that customer. G. Unauthorized disclosure of buying habits of several well-known customers. H. Loss of all information about amounts owed by customers in New York City because the master database for that office was destroyed in a fire. I. Interception and theft of customers’ credit card numbers while being sent to the company’s Web site. J. A fire in the office next door damaged the company’s servers and all magnetic media in the server room. The company immediately implemented its disaster recovery procedures and shifted to a backup center several miles away. The company had made full daily backups of all files and stored a copy in the backup center. However, none of the backup copies were readable. II. Jin, a CPA, was hired by Kale Company in 2005 to determine the effect of a number of errors on the firm’s financial statements. Treat each section (A and B) as independent. For each item, you are to indicate the effect of the errors on the net income, retained earnings and working capital for 2003, 2004, and 2005. Assume that all items are material and ignore income tax effects. The firm’s fiscal year ends on December 31. Your answers should be labeled NO EFFECT, OVER (for overstated), or UNDER for (understated) and include the dollar amount
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This note was uploaded on 09/09/2009 for the course ACCTG 321 taught by Professor Will during the Spring '08 term at San Diego State.

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Exam_I_Fall_2006 - ACCOUNTANCY 321 Fall 2006 EXAM I I What...

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