Unformatted text preview: Problems (Group A) P7-25A (L. OBJ 1, 2, 3, 4) Internal control, components, procedures and TERMS: IĀ») 'JI ween? 1i]. i].
13. Internal control
Firewalls Encryption Control environment Information system Separation of duties Monitoring of controls
Documents Audits Operational efficiency
Risk assessment Sarhanes-Oxley Act laws [20ā25 min] DEFINITIONS: Ionnpoe> .ā K.
L. . What internal and external auditors do Part of internal control that ensures resources are not wasted Law that requires testing internal control systems Provides the details of business transactions Limits access to a local network Control procedure that divides responsibility between two or moreā people
Identification and evaluation of threats to the business . May be internal! and external Component of internal control that helps ensme decision makers receive accurate data The organizational plan and all the related measures that safeguard assets, encourage employees to follow company policy1 promote operational efļ¬ciency. and insure accurate reliable accounting data Component of internal control that helps ensure business goals are achieved Rearranges data by a mathematical process M. The ātone at the topā Requirement 1. Match the terms with their deļ¬nitions. [10ā20 min] Each of the following situations has an internal control weakness. 3. Rite-Way Applications sells accounting software. Recentiy1 development of a new
program stopped while the programmers redesigned RiteāWayās accounting sys-
tem. Rite'Way'saccountants could have performed this task. I). Betty (Stable 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 ofrhe 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 inLāorne. c. Sanchez Hardwoods, a private company1 falsiļ¬ed sales and inventory ļ¬gures in
order to get an important loan. The loan went through, but Sanchez later went
bankrupt and could not repay the bank. d. The ofļ¬ce supply company where Champs Sporting Goods purchases sales
receipts recently notified Champs that its documents were not prenumhered. Alex
Champ, the owner, replied that he never uses receipt numbers. e. Discount stores such as Tallon make most of their sales for cash, with the
remainder in credit-card sales. To reduce expenses, one store manager ceases pur-
chasing fidelity bonds on the cashiers. f. Bobās Burger House keeps all cash received from sales in a safe because Bob thinks banks are not āsafe." P7-26A (L. OBJ. 3, 5, 7, 8) Correcting internal control weakness ,2 Aid
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- Spring '11