HAdams_ControlProcedures_012011

HAdams_ControlProcedures_012011 - Week 03 Activity -...

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Week 03 Activity - Control Procedures In the week's activity, you examine control procedures in a manufacturing company. Read "Case 5-2: Lexsteel Corporation" at the end of Chapter 5 and answer the questions related to the case. Questions 1) The three areas where Lexsteel Corporation may be exposed to fraud or embezzlement due to weaknesses in the procedures described are the following: a. Lexsteel Corp allows their branch managers to issue purchase orders in emergencies by dealing with the vendor directly. This allows branch managers to bypass purchasing controls. Also, Lexsteel does not clearly identify what classifies as being an emergency, so the branch managers can make their own call on what is classified as an emergency even if it isn’t one. In order to correct this weakness, Lexsteel should set up procedures for the expedition of emergency orders in the purchasing department. b. Another weakness is that invoices are not authorized and the documentation is not verified before they are sent and directly entered into accounts payable. In
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HAdams_ControlProcedures_012011 - Week 03 Activity -...

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