Consider the following situations for each of the privately owned organizations independently. For each situation, identify the risk exposures and any possible controls.

a. In your observation of the payables posting function of 'a construction firm, you notice that a payables clerk prepares a check, obtains the signature of a corporate officer on it, then posts the transaction to the general ledger using the check and supporting documents as source data. The same clerk then prepares the check for mailing to the vendor. An accounts payable manager will reconcile the bank account to the appropriate subsidiary journal when the statement comes the next month. The statement is sent to the clerk's office.

b. During your review of the documentation flow of a warehouse for an audio equipment retailer, you see that the warehouse workers get a copy of the original purchase order whenever they complete a receiving report on an incoming shipment. Upon walking through the warehouse itself, you see that if work backs up, justarrived goods are often left in the warehouse for several hours before the receiving report is completed.

c. Your client, a multinational manufacturer of personal communications devices, convenes a board of directors meeting each quarter. At that meeting, the controller makes a report on any control deficiencies her staff of internal auditors has identified. The board consists primarily of the senior managers of the firm and a few outside directors appointed mostly for their status in the political community.

d. The sales return procedure for your client, a large retailer of housewares, goes as follows: A sales clerk removes a sales return form from a pad, fills it out with the customer's personal information, accepts the merchandise back, and refunds the money listed on the receipt. The sales return form is then given to an accounting clerk while the original clerk returns the merchandise to the shelf or places it in a bin for repair.

e. The sales order process for your client, a mail-order software firm, is as follows: Clerks discuss the order over the telephone, input a customer number (if a repeat customer) into sales-order system, enter the goods ordered into a batch file, and secure the customer's commitment to the sale. The batch file from yesterday's sales is downloaded to the warehouse each morning where an automated system generates picking tickets and invoices. Warehouse workers find the software package, affix the invoice, ship the goods, and update the accounting records accordingly.

f. On observing the incoming receipts process of a regional newspaper, you notice the following: Checks and remittance advices are received along with the rest of the newspaper's mail. Clerks open the mail, remove the contents, mark the remittance advice with the customer's payment, prepare the deposit slip, and give it to the armored courier each afternoon. The remittance advices are then forwarded to the data processing area for entry into the subsidiary ledger.