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Internal Control Cases I. SMIIH'S MARKET (SMALL BUSINESS CASH SALES ACCOUNTING SYSTEM In I989.Robert8mithopeneda Inullfruitandwge- tahh market in...

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How would the warehouse clerk, the accounting clerk, and the CPA firm consulting with Smith Market be able to commit fraud?

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Internal Control Cases I. SMIIH’S MARKET (SMALL BUSINESS
CASH SALES ACCOUNTING SYSTEM In I989.Robert8mithopeneda Inullfruitandwge-
tahh market in Bethlehem. mm. Oliginally.
Snfitheoldoulypmduoeymonhlefamilyfam
and omhard‘ A: the market's popularity grew. how-
ow.headdedbmad.oannedgooda.fiuhmeata.and
a limited supply of Fromm goods. Today Smith‘s
Markotisa filEl-rangofarmon’marketudthaalnmg
looal customer base, lmleed. the market's reputation
for low prime: and high quality draws customers
fmmotheernnsylv-ninoifiuandevcnfrmnthe
neighboring state of New Jersey. Currently Smith's
hadflmplw.’lhoaaincludemlosmfi]abelf
molten. tarmlaborere. stun superman, and olerioal
stafllRoomfly,Smithhasnofioodado-clincinpmfits
and aloe. while his purchase: ofproduete for resale
hlwoontinuodtorisr.AlIhoushth-=oomfln¥ does
not prepare audited finandal atatunmte, Robert
Smith has commissioned your public accounting
fimtoamhismmpany‘ssalosprocod‘ureaand
internal controls. Smith‘e Market expenditure cycle
pruduma an: (headland below. Expenditure Cycle
Napondimmlebeginsinlhewarehmadjm
tothcmarketwtnremith'skmpait: intentoryof nonparillmblegoodsmdtaamodpodaandpaper
produota The company also maintains a one-day immofpmduoeaadotlmpefihablepmdnotsm
thwamhouseaodflhoanqnioktyreetooktholhfllm
whamfitdoeeofhmimeaohmningthe
warehousederkrwiwethemarlretshdmi‘oriteme
thatmadmbempteniahad.mdwkmnmhthe
shelves and adjueta the digital stackreooa'ds armor-d-
inglyfiummcwmhousoPCAtthismthcdofl!
whatnot: ofwmtmefiatobereorderod fromtheeup—
pfimandpdnupumorrhnfmmthePGDepmd-
ingupunthenatureufthapmduotandmymoyoftl'l
mithechrkeitlumaflatheputchaseordertothe
mpflhorortimbyphom.Phommdmmfoflowod
upbylhxingthepurdtaaeordertolltempplier‘m
drgoodaarrivefrmthovmdor.fllcwamhouzderk
mien: the puking Ilip, restock: the warehouse
Mmmmmmeflmkmdsfiommm
Atflnmdofthodaythouhkprqmreaahard—oopy
purohueuummaryflomthePCandsndaittothe
mamrychrkfapoflingmmmw.
Thevendot’elnvoioelseenttotheaoootmfingdwk
Shcmmhtoaitfurmandfilmithampo-
raryfilemfilitiadueoo‘ocpaidfl‘hccbrkmmo
tunporaryfiledailylookingforinvoioeetobepaid.
Uingflzmmfingdopnrflnththedm-kpfinta
aoltorkandrwordeitinthedigitalclieoktegieterfihe
mmwmandmflsthodmkmmcamh.
Attheendot‘thedayalteprinteahard—oopyjmmal
wmher from the PC, whit]: mammal-Ema the daft
mammmdmitmflmwmdm
forpoelingtothemalledser, meme 239

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Usingthedepanmentl’flthetreasuryelfltpmu
the jeurnal 1met-Janet and purchases summery infer-
matiun In the appmpriale genera] ledger amuunts- Required a. Create a data flaw diagram If the carreal system. b. Create a ayatem flnumhart 111' the ettrteat system 1:. Analyze the physical internal control mingle-s
in the system Mendel year resptmse meet-ding tn
the at aategm‘iea uf phyaicsa] annual actifitiea
wet-med in the CD51} inteme] central made]. tL Deau'ihefl'tel'l'mntmls Ihalshnuld beinplaeein
thieeyetem.

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