Exam_II_Sp_2006 - ACCOUNTANCY 321 Spring, 2006 EXAM II I....

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ACCOUNTANCY 321 Spring, 2006 EXAM II I. What control policies and procedures in a production information system would provide the best protection against the following errors? Protection is used broadly here to include prevent, detect, and correct. List ONE (and only one) item for each item, A-F; each part is worth 2 points. You MUST relate the controls to the specific scenario in each part (that is, generic answers such as “separation of duties” are NOT correct). A. A stock clerk stole items from the raw materials stock room. Two clerks are employed but since the company runs two shifts, only one clerk is on duty at any one time. B. A production employee stole partially completed items from the work-in-process inventory. The items were sitting on a cart in the isle after the polishing process was completed. C. Production workers continued to produce the product even though its quality was below standard. The company uses a process cost system. D. Containers with lids in which finished product are stored are always used in pairs. Also containers and lids are always purchased in pairs. However, the inventory records consistently show more lids than containers. E. After the inspector finished inspecting the finished goods (a batch of chairs in a job costing systems) he entered “20” good chairs, rather than “200” good chairs. The original job order specified 220 chairs. This created an error in both finished goods inventory and the amount of scrap for the job. F. Production workers in a process costing system posted some of their time that they actually spent working in Department B to Department A. The workers don’t like the manager of Department A, and they want to get him fired. II. In May, 2001, the SEC sued the former top executives at Sunbeam, charging the group with financial reporting fraud which allegedly cost investors billions in losses. Sunbeam Corporation is a recognized designer, manufacturer, and marketer of household and leisure products, including Coleman, Eastpak, First Alert, Grillmaster, Mixmaster, Mr. Coffee, Oster, Powermate, and Campingaz. In the mid-1990s, Sunbeam needed help: its profits had declined by over 80%, and in 1996, its stock price was down over 50% from its high. To the rescue: Albert Dunlap, also known as “Chainsaw Al” based on his reputation as a ruthless executive known for his ability to restructure and turn around
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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_II_Sp_2006 - ACCOUNTANCY 321 Spring, 2006 EXAM II I....

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