Each of the following situations has an internal control weakness: a. Soft Wizzard Applications sells accounting software.

Question:

Each of the following situations has an internal control weakness:
a. Soft Wizzard Applications sells accounting software. Recently, development of a new program stopped while the programmers redesigned Soft Wizzard’s accounting system. Soft Wizzard’s accountants could have performed this task.
b. Rita Johnson has been your trusted employee for 30 years. She performs all credit functions, including credit authorization. Ms. Johnson 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 $27,500 a year and she has no source of outside income.
c. Wong Hardwoods, a private company, falsified sales discount and net profit figures in order to get an important loan. The loan went through, but Wong later went bankrupt and could not repay the bank.
d. The office supply company where Retail Display Goods purchases customer invoices recently notified Retail Display Goods that its documents were not pre-numbered.
Adrian Monet, the owner, replied that he never uses the customer invoice numbers.
e. Discount stores such as Wallman make most of their sales for cash, with the remainder in credit-card sales. To reduce expenses and increase efficiency, the store manager stops rotating clerks among different job stations.
f. Kayleigh’s Keys keeps all cash receipts in an old hat box for a month because Kayleigh likes to “see” her earnings.
Requirements
1. Identify the missing internal control characteristic in each situation.
2. Identify the possible problem caused by each control weakness.
3. Propose a solution to each internal control problem.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial and Managerial Accounting

ISBN: 978-0132497978

3rd Edition

Authors: Horngren, Harrison, Oliver

Question Posted: