Each of the following situations has an internal control weakness. a. Betty Grable has been your trusted
Question:
Each of the following situations has an internal control weakness.
a. Betty Grable has been your trusted employee for 30 years. She performs all cash-handling and accounting duties. Betty 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 sources of outside income.
b. Sanchez Hardwoods, a private company, falsified sales and inventory figures to get an important loan. The loan went through, but Sanchez Hardwoods later went bankrupt and couldn’t repay the bank.
c. The office supply company where Champ’s Sporting Goods purchases its business forms recently notified Champ’s Sporting Goods that its documents were no longer going to be pre-numbered. Alex Champ, the owner, replied that he never uses the receipt numbers anyway.
d. Discount stores such as Giant Tiger make most of their sales in cash, with the remainder in credit card sales. To reduce expenses, one store manager allows the cashiers to record sales in the accounting records.
Step by Step Answer:
Financial Accounting
ISBN: 978-0132889711
1st Canadian Edition
Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper