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CHAPTER 5 ACCOUNTING SYSTEMS AND INTERNAL CONTROLS CLASS DISCUSSION QUESTIONS 1. The knowledge that job rotation is practiced and that one employee may perform an- other’s job at a later date tends to discour- age deviations from prescribed procedures. Also, rotation helps to disclose any irregu- larities that may occur. 2. Authorizing complete control over a se- quence of related operations by one indi- vidual presents opportunities for ineffi- ciency, errors, and fraud. The control over a sequence of operations should be divided so that the work of each employee is auto- matically checked by another employee in the normal course of work. A system func- tioning in this manner helps prevent errors and inefficiency. Fraud is unlikely without collusion between two or more employees. 3. To reduce the possibility of errors and em- bezzlement, the functions of operations and accounting should be separated. Thus, one employee should not be responsible for handling cash receipts (operations) and maintaining the accounts receivable re- cords (accounting). 4. No. Combining the responsibility for related operations, such as combining the func- tions of purchasing, receiving, and storing of supplies, increases the possibility of er- rors and fraud. 5. The control procedure requiring that re- sponsibility for a sequence of related oper- ations be divided among different persons is violated in this situation. This weakness in the internal control may permit irregular- ities. For example, the ticket seller, while acting as ticket taker, could admit friends without a ticket. 6. The responsibility for maintaining the ac- counting records should be separated from the responsibility for operations so that the accounting records can serve as an inde- pendent check on operations. 7. The individual accounts receivable ledger accounts provide business managers in- formation on the status of individual cus- tomer accounts, which is necessary for managing collections. Managers need to know which customers owe money, how much they owe, and how long the amount owed has been outstanding. 8. The major advantages of the use of special journals are substantial savings in record- keeping expenses and a reduction of re- cord-keeping errors. 9. a. 250 b. None 10. a. 250 b. 1 11. a. Sometime following the end of the cur- rent month, one of two things may hap- pen: (1) an overdue notice will be re- ceived from Hoffman Co., and/or (2) a letter will be received from Hoffer Co., informing the buyer of the overpay- ment. (It is also possible that the error will be discovered at the time of making payment if the original invoice is in- spected at the time the check is being written.) b. The schedule of accounts payable would not agree with the balance of the accounts payable account. The error might also be discovered at the time the invoice is paid.
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This note was uploaded on 01/15/2012 for the course ACC 305 taught by Professor Williams during the Spring '11 term at University of Phoenix.

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