accounting 1 week 5 discussion

accounting 1 week 5 discussion - Accounting I Week 5...

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Accounting I Week 5 Discussion Problem P7-26A – Page 415 A. Rite-Way Applications sells accounting software. Recently, development of a new program stopped while the programmers redesigned Rite-Way's accounting system. Rite-Way's accountants could have performed this task. 1. Missing internal control: Promote operational efficiency 2. Possible problem caused by control weakness: Rite Way’s accountants would have been better served completing this task themselves thereby preventing downtime and relying on programmers. Proposed solution: Downtime results in wasted salary expense while programmers redesigned Rite Way’s system. Having a clearly drawn out plan of employee responsibilities would have been more efficient for Rite Way. B. Betty Grable has been your trusted employee for 30 years. She performs all cash handling and accounting duties. Ms. Grable just purchased a new Lexus and a new home in an expensive suburb. As owner of the company, you wonder how she can afford these luxuries because you pay her only $35,000 a year and she has no source of outside income. 1. Missing internal control: Safeguard assets 2. Possible problem caused by control weakness: Ms. Grable, for 30 years, has had complete responsibility for all cash handling and accounting duties. It is safe to assume that during the course of such a long period of time Ms. Grable would have found a few shortcuts and ways to skim money undetected. Being aware that she has no other source of income it is a bit surprising that she is able to afford luxuries like a new Lexus and a new home. Of course there is a possibility that these luxuries were attained by other means such as an inheritance or a gift.
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