POA11e07 - CHAPTER 7Solutions INTERNAL CONTROL Chapter 7 SE...

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Ch7 SE1 to SE6 CHAPTER 7—Solutions INTERNAL CONTROL Chapter 7, SE 1. 1. d 2. a 3. b 4. c Chapter 7, SE 2. 1. d 4. a 2. b 5. c 3. e Chapter 7, SE 3. 1. d 3. a 2. b 4. c Chapter 7, SE 4. 1. b 2. c 3. a Chapter 7, SE 5. 1. b 4. d 2. a 5. b 3. c Chapter 7, SE 6. 1. f 5. a 2. d 6. c 3. g 7. b 4. e
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Ch7 SE7 to E3 Chapter 7, SE 7. The proper order of the documents is: 6, 2, 1, 4, 7, 3, 5 Chapter 7, SE 8. 2011 May 31 Postage Expense 29 Office Supplies Expense 34 Cash Short or Over 1 Cash 64 To replenish the petty cash fund Chapter 7, E 1. 1. An audit of management's assessment of internal control is important because investors and creditors, who are outside the company, want to know that the financial statements are prepared properly in accordance with GAAP and that the company's assets are protected. 2. A system of internal control cannot overcome collusion because the system depends on separation of duties in which each employee carries out his or her duties independently. 3. Merchandise inventory would be assigned a higher level of risk because there is a greater risk of human error in recording the large number of transactions involved and because there is a greater risk of theft. Chapter 7, E 2. 1. The internal audit department plays a monitoring role in internal control. 2. A bank reconciliation is a control activity that provides periodic independent verification. 3. It is important to write down cash received because until there is a record of the cash received, it is not possible to hold an employee responsible for it. Chapter 7, E 3. 1. e 6. a or d 2. a 7. d 3. b 8. e 4. d 9. c 5. c
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Ch7 E4 to E7 Chapter 7, E 4. 1. c 2. a 3. b 4. d Chapter 7, E 5. 1. g 2. e 3. a, c, f 4. g 5. b, c Chapter 7, E 6. Prepared by Received by 1. g d 2. a b 3. b f 4. d e 5. f d 6. e f 7. c d Chapter 7, E 7. 1. The 30 percent increase represents about one additional employee on the payroll (after accounting for the raises). It is possible that the branch office manager has either added an unauthorized employee to the payroll or added a fictitious employee to the payroll and then cashed the payroll checks him- self or herself. 2. The large increase in sales returns and allowances immediately following year end probably means that, to meet sales goals, the sales staff inflated the pre- vious year's sales by shipping unordered merchandise or by sending goods on approval. Those goods were subsequently returned for credit in the first two months of 2011. 3. All other things being equal, a decrease in both gross margin and ending in- ventory probably indicates the theft or pilferage of inventory by customers or employees. 4. The cashier in question may be turning in and ringing up discount coupons available in the store and pocketing the cash for the coupons. Businesses often have extra coupons in the store for customers who request them.
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Ch7 E8 to E9 Chapter 7, E 8. The weak point in this system is having the petty cash custodian audit the sales
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This note was uploaded on 11/02/2011 for the course ACCT 210 taught by Professor Mcgonigal during the Spring '11 term at E. Washington.

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POA11e07 - CHAPTER 7Solutions INTERNAL CONTROL Chapter 7 SE...

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