KIMMEL_Acct_2e_ProblemCSolutions_ch07

Accounting: Tools for Business Decision Making

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: SOLUTIONS TO PROBLEMS PROBLEM 7-1C (a) Weaknesses include the following. 1. There is no clear establishment of responsibility. All members ap- pear to have the authority to take books and collect cash. 2. There is little or no segregation of duties. The treasurer purchased the books, and will deposit cash as it is collected. 3. There are no documentation procedures. Members are allowed to take books without completing a receipt. It does not appear that receipts are issued as books are sold. 4. Physical, mechanical, and electronic controls are lacking. The books are kept on an open shelf in an office that is accessible to many people. Cash is kept in a desk drawer. 5. Independent internal verification procedures are not used. The treasurer handles all cash transactions and no one tracks the supply of books. (b) Improvements include the following. 1. A club member should be assigned as the director of this fund- raising program. This member would track distribution, sales, and returns of books. 2. Someone other than the treasurer should handle and track cash receipts from this activity. Receipts would then be forwarded to the treasurer for deposit. 3. Members who take books should sign a pre-numbered receipt and be informed that they must return the book or payment within a designated amount of time. 7-1 PROBLEM 7-1C (Continued) 4. The supply of books should be kept in a secure (locked) location, not on an open shelf. When students need more books, they must contact the member in charge of inventory and complete a receipt. Collections from sales must be kept in a secure (locked) location and deposited in the bank as collected. 5. An independent club member with no responsibility for purchase, distribution, or sales of the books should perform an audit of cash receipts and disbursements as well as accounting for all books purchased, sold, and returned. 7-2 PROBLEM 7-2C Violations: 1. It is Marys responsibility to post payments to patient accounts. In allow- ing Sam to assist her, the establishment of responsibility principle is violated. 2. Although this may be a small office, it is not appropriate that Sam opens the mail, prepares a bank deposit form, and receives and records cash receipts from patients. This violates the segregation of duties principle. 3. The documentation principle is violated when patients are not given cash receipts. 4. Independent internal verification is also violated. There is no independent counting of the cash and comparison to total receipts. 5. Leaving the computer program on all the time and failing to comply with employee specific user ID and password violates physical, mechanical, and electronic controls. 6. Other controls are being violated. Sam should be required to take a va- cation and since he handles cash, he should be bonded....
View Full Document

Page1 / 11

KIMMEL_Acct_2e_ProblemCSolutions_ch07 - SOLUTIONS TO...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online