201 Week 6

201 Week 6 - Problem 8-1A 1. Violates separation of duties....

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Problem 8-1A 1. Violates separation of duties . The company should implement a policy whereby the person recording incoming cash receipts is not responsible for posting the payments to the customer accounts. 2. Violates the principle of establishing responsibility . Only Jenn should have access to the petty cash fund since she is the custodian. The company should implement a policy of not allowing petty cash transactions over the lunch hour. Alternatively, Kirsten could also serve as a petty cash custodian with her own petty cash fund. 3. Violates the proper application of technological controls . While the daily backup is a very good internal control, the tape needs to be taken off the premises every night. If the building and computer are destroyed, the data then can be restored from the tape since it is safely kept off the premises. The company should implement a policy of storing tapes off the premises nightly. 4. Violates regular and independent review . Sanjay Shales needs to implement a way to regularly and independently review his employees. Hiring of internal auditors or an outside consultant to objectively review the internal controls and the employees’ work needs to be implemented. 5. Violates the insuring of assets and the bonding of key employees . We do not have enough information to know if the company can afford the move to the higher deductible on the property insurance. However, we can say that dropping the insurance for bonding the employees weakens internal control. If the company does need to engage in cost cutting they should do it without compromising its internal controls. The insurance for the bonding of employees (or at least key employees and those in sensitive positions) should be reinstated.
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Problem 8-3A Part 1 May 1 Petty Cash. .............................................................. 350.00 Cash. .................................................................. 350.00 To establish the $350 petty cash fund. May 15 Janitorial Expenses. ............................................... 109.20 Miscellaneous Expenses. ...................................... 89.15 Postage Expenses. ................................................. 60.90 Advertising Expense. ............................................. 80.01 Cash Over and Short. ....................................... 6.10 Cash. .................................................................. 333.16 To reimburse the petty cash fund. May 16
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201 Week 6 - Problem 8-1A 1. Violates separation of duties....

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