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Accounting Information Systems 6th Edition James A. Hall - Solutions
Which function should the billing department NOT perform?a. record the sales in the sales journalb. send the ledger copy of the sales order to accounts receivablec. send the stock release document and the shipping notice to the billing department as proof of shipmentd. send the stock release
Which of the following is NOT an independent verification control?a. The shipping department verifies that the goods sent from the warehouse are correct in type and quantity.b. General ledger clerks reconcile journal vouchers that were independently prepared in various departments.c. The use of
Distinguish between an AP file and a vouchers payable file.
USA Cycle Company(Prepared by Byung Hee Pottenger, Lehigh University)USA Cycle Company is one of the fastestgrowing bicycle distributors in the United States, with headquarters in Chicago. Its primary business is distribution of bicycles assembled in China, but it also has a smaller, custom-order
Green Mountain Coffee Roasters, Inc.(Prepared by Lisa McCutchean, Lehigh University)Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small cafe in Waitsfield, Vermont, roasting and serving premium coffee. Green Mountain blends and distributes coffee to a variety of
Why do the inventory control and general ledger departments seem to disappear in computerbased purchasing systems (Figure 5-14)? Are these functions no longer important enough to have their own departments?
Bait ‘n Reel Superstore(Prepared by Matt Wisser, Lehigh University)Background Jamie Roberts, an avid fisherman and environmentalist, established Bait ‘n Reel in 1983.Growing up in Pennsylvania’s Pocono Mountains region, Roberts was lucky enough to have a large lake right down the road where
Music Source, Inc.(Prepared by Jeff Davis, Gen Feldman, and Denise Nuccio, Lehigh University)Company Information Music Source, Inc., is a manufacturer of stereo equipment with six sales offices nationwide and one manufacturing plant in Pennsylvania.Currently, employment is at approximately 200
Segregation of Functions Which, if any, of the following situations represent improper segregation of functions?a. The billing department prepares the customers’invoices, and the accounts receivable department posts to the customers’accounts.b. The sales department approves sales credit memos
Flowchart Analysis Use the flowchart on the following page to answer these questions:a. What accounting document is represented by symbol A?b. What is an appropriate name for the department labeled B?c. What would be an appropriate description for process C?d. What is the location represented by
Batch Processing Refer to Figure 4-22 and explain where the journal vouchers come from and which accounts in the general ledger are affected in the end-of-day batch process.
Systems Description Describe the procedures, documents, and departments involved when insufficient inventory is available to fill a customer’s approved order.
Which of following functions should be segregated?a. opening the mail and recording cash receipts in the journalb. authorizing credit and determining reorder quantitiesc. shipping goods and preparing the bill of ladingd. providing information on inventory levels and reconciling the bank statement
Which situation indicates a weak internal control structure?a. the AR clerk authorizes the write off of bad debtsb. the record-keeping clerk maintains both AR and AP subsidiary ledgersc. the inventory control clerk authorizes inventory purchasesd. the AR clerk prepares customer statements every
Internal Control Evaluation Identify the control weaknesses depicted in the flowchart on page 217. Customer Sales Department Billing Accounts Receivable Warehouse General Ledger Customer Order Remit Advice Check Customer Order Sales Journal SO Invoice Copy SO Ledger Copy SO Ledger Copy Sales Clerk
Stewardship Identify which department has stewardship over the following journals, ledgers, and files.a. Customer open order fileb. Sales journalc. Journal voucher filed. Cash receipts journale. Inventory subsidiary ledgerf. Accounts receivable subsidiary ledger g. Sales history file h. Shipping
Control Weaknesses For the past 11 years, Elaine Wright has been an employee of the Star-Bright Electrical Supply store. Elaine is a very diligent employee who rarely calls in sick and staggers her vacation days throughout the year so that no one else gets bogged down with her tasks for more than
Jasmine Tea(Prepared by Meridith Coyne and Gaby Keely, Lehigh University)Jasmine Tea distributes specialty tea leaves to coffee shops, cafes, and restaurants across the country. The company’s headquarters is in Newark, New Jersey, and two distribution warehouses are in Philadelphia and
Premier Sports Memorabilia(Prepared by Chris Polchinski, Lehigh University)General Scenario Premier Sports Memorabilia General Scenario is a medium-sized, rapidly growing online and catalogue-based retailer centered in Brooklyn, New York. The company was founded in 1990 and specializes in providing
A&V Safety, Inc(Prepared by Adam Johnson and Aneesh Varma, Lehigh University)A&V Safety, Inc., is a growing company specializing in the sales of safety equipment to commercial entities. It currently employs 200 full-time employees who work out of its headquarters in San Diego, California.During the
Walker Books, Inc.(Prepared by Matt Wisser, Lehigh University)Company Background Walker Books, Inc., is currently one of the largest book distributors in the United States.Established in 1981 in Palo Alto, California, Walker Books was originally a side project of founder and current president
System Configuration The flowchart on page 220 represents the computer processing portion of a sales order system. Answer the following questions.a. What type of data processing system is this? Explain, and be specific.b. The marketing manager suggests that this system can be greatly improved by
System Configuration The computer processing portion of a sales order system is represented by the flowchart shown below.Answer the following questions.a. What type of data processing system is this? Explain, and be specific.b. The auditor suggests that this system can be greatly simplified by
Internal Control You are investing your money and opening a fast-food Mexican restaurant that accepts only cash for payments. You plan on periodically issuing coupons through the mail and in local newspapers. You are particularly interested in access controls over inventory and cash.Required:Design
Internal Control Iris Plant owns and operates three floral shops in Magnolia, Texas. The accounting functions are performed manually. Each of the shops has a manager who oversees the cash receipts and purchasing functions for the shop. A clerk at the central shop pays all the bills and also
Which function or department below records the decrease in inventory due to a sale?a. warehouseb. sales departmentc. billing departmentd. inventory control
What is the objective of SAS 99?
What are the main issues to be addressed in a business code of ethics required by the SEC?
What is ethics?
Update Process Examine the diagram above, which contains the processing order for a transaction file and a master file for a sequential file update process.Indicate the order in which the transactions are processed. Indicate which master file records are updated and which are read and written,
Entity Relationship Diagram Shown above is a partial ER diagram of a purchase system. Describe the business rules represented by the cardinalities in the diagram. Problem: 4 Entity Relationship Diagram Updates Contains Inventory M 1 M 1 Supplier 1 M M M Is Associated with Receiving Report Purchase
Entity Relationship Diagram Prepare an ER diagram, in good form, for the expenditure cycle, which consists of both purchasing and cash disbursements. Describe the business rules represented by the cardinalities in the diagrams. Symbol 6 Symbol 9 Symbol 1 Symbol 2 Symbol 4 Symbol 3 Symbol 5 Symbol 8
System Flowchart Analyze the system flowchart on the following page and describe in detail the processes that are occurring. Employee Master File Time Sheets Enter Data Payroll Data Edit Errors Cost Center Master File Enter Corrections Edited Transactions Employee Master File Update Cost Center
When an adding machine tape of the individual account balances was run, the individual balances did not add up to the total at the bottom of the report.Susan concluded that the accounts receivable program was not running properly. The auditor’s recommendation was that an effort be made to find
Segregation of Duties Explain why each of the following combinations of tasks should or should not be separated to achieve adequate internal control.a. Approval of bad debt write-offs and the reconciliation of the accounts receivable subsidiary ledger and the general ledger control account.b.
Mail Room Fraud and Internal Control Sarat Sethi, a professional criminal, took a job as a mail room clerk at Benson & Abernathy P r o b l e m s and Company, a large department store. The mail room was an extremely hectic work environment consisting of a supervisor and 45 clerks. The clerks were
Fraud Scheme A procurement agent for a large metropolitan building authority threatens to blacklist a building contractor if he does not make a financial payment to the agent. If the contractor does not cooperate, the contractor will be denied future work. Faced with a threat of economic loss, the
Fraud Scheme A purchasing agent for a home improvement center is also part owner in a wholesale lumber company. The agent has sole discretion in selecting vendors for the lumber sold through the center. The agent directs a disproportionate number of purchase orders to his company, which charges
The fraud scheme that is similar to the“ borrowing from Peter to pay Paul” scheme isa. expense account fraud.b. bribery.c. lapping.d. transaction fraud.
Which of the following is NOT a necessary condition under common law to constitute a fraudulent act?a. injury or lossb. material factc. written documentationd. justifiable reliance
Which of the following is often called a compensating control?a. transaction authorizationb. supervisionc. accounting recordsd. independent verification
Expense Account Fraud While auditing the financial statements of Petty Corporation, the certified public accounting firm of Trueblue and Smith discovered that its client’s legal expense account was abnormally high. Further investigation of the records indicated the following:• Since the
Tollbooth Fraud Collectors at Tollbooths A and B (see the following figure) have colluded to perpetrate a fraud. Each day, Tollbooth Collector B provides A with a number of toll tickets prestamped from Tollbooth B. The price of the toll from Point B to Point A is 35 cents. The fraud works as
Factors of Fraud Research has shown that situational pressures and opportunity are factors that contribute to fraudulent behavior.Required:a. Identify two situational pressures in a public company that would increase the likelihood of fraud.b. Identify three opportunity situations that would
Whodunit?(This case was prepared by Karen Collins, Lehigh University)The following facts relate to an actual embezzlement case.Someone stole more than $40,000 from a small company in less than two months. Your job is to study the following facts, try to figure out who was responsible for the theft,
Breezy Company(This case was prepared by Elizabeth Morris, Lehigh University)Breezy Company of Bethlehem, Pennsylvania, is a small wholesale distributor of heating and cooling fans. The company deals with retailing firms that buy small to medium quantities of fans. The president, Chuck Breezy, was
Bern Fly Rod Company Bern Fly Rod Company is a small manufacturer of high-quality graphite fly-fishing rods. It sells its products to fly-fishing shops throughout the United States and Canada.Bern began as a small company with four salespeople, all family members of the owner.Due to the high
Evaluation of Controls Matt Demko is the loading dock supervisor for a dry cement packaging company. His work crew is composed of unskilled workers who load large transport trucks with bags of cement, gravel, and sand. The work is hard, and the employee turnover rate is high. Employees record their
Evaluation of Controls Gaurav Mirchandaniis is the warehouse manager for a large office supply wholesaler. Mirchandaniis receives two copies of the customer sales order from the sales department. He picks the goods from the shelves and sends them and one copy of the sales order to the shipping
Kickback Fraud The kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent
Financial Aid Fraud Harold Jones, the financial aid officer at a small university, manages all aspects of the financial aid program. Jones receives requests for aid from students, determines whether the students meet the aid criteria, authorizes aid payments, notifies the applicants that their
CMA 1289 3–4 Evaluation of Internal Control Oakdale, Inc. is a subsidiary of Solomon Publishing and specializes in the publication and distribution of reference books. Oakdale’s sales for the past year exceeded $18 million, and the company employed an average of 65 employees.Solomon
Which of the following controls would best prevent the lapping of accounts receivable?a. Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.b. Request that customers review their monthly statements and report
According to SAS 78, the proper segregation of functions is an effective internal control procedure. Comment on the exposure (if any)caused by combining the tasks of paycheck preparation and distribution to employees.
If detective controls signal error flags, why shouldn’t these types of controls automatically make a correction in the identified error?Why are corrective controls necessary?
The estimates of losses annually due to computer fraud vary widely. Why do you think obtaining a good estimate of this figure is difficult?
Some argue against corporate involvement in socially responsible behavior because the costs incurred by such behavior place the organization at a disadvantage in a competitive market.Discuss the merits and flaws of this argument.
Why are the computer ethics issues of privacy, security, and property ownership of interest to accountants?
To conceal the theft of cash receipts from customers in payment of their accounts, which of the following journal entries should the bookkeeper make?DR CRa. Miscellaneous Cash Expenseb. Petty Cash Cashc. Cash Accounts Receivabled. Sales Returns Accounts Receivablee. None of the above
The underlying assumption of reasonable assurance regarding implementation of internal control means thata. by the control that fraud has not occurred in the period.b. auditors are reasonably assured that employee carelessness can weaken an internal control structure.c. implementation of the
Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits is least likely to occur?a. reduction of cost of an external auditb. prevention of employee collusion to commit fraudc. availability of reliable data for
In this age of high technology and computerbased information systems, why are accountants concerned about physical (human)controls?
Explain the purpose of the PCAOB.
Explain the problems associated with lack of auditor independence.
What are the six broad classes of physical control activities defined by SAS 78?
How realistic are the assumptions of the EOQ model? Discuss each assumption individually.
What documents are needed for cost accounting clerks to update the WIP accounts with standard charges?
Define computer integrated manufacturing(CIM).
Distinguish between activities and cost objects in ABC.
What is meant by the statement, “Inventories camouflage production problems and can cause overproduction”? What is wrong with overproduction if you already own the RM?
Describe the internal control improvements to the system that are needed to reduce these risks. Fixed Asset Flowchart Analysis Vendor User Department Cash Disbursements General Ledger Purchase Order Invoice Check Maintain Usage Records Prepare PO Purchase Order Invoice Receiving Report Cash Disb
Fixed Asset Flowchart Analysis Discuss the risks depicted by the fixed asset system flowchart on page
Fixed Asset System Holder Co. maintains a large fleet of automobiles, trucks, and vans for their service and sales force. Supervisors in the various departments maintain the fixed asset records for these vehicles, including routine maintenance, repairs, and mileage information. This information is
Fixed Asset System The fixed asset acquisition procedures for Turner Brothers, Inc., are as follows:Supervisors in the user departments determine their fixed asset needs and submit bids or orders directly to contractors, vendors, or suppliers. In the case of competitive bidding, the user makes the
Comprehensive Flowchart Analysis Discuss the internal control weaknesses in the expenditure cycle flowchart on page 316.Structure your answer in terms of SAS 78 control activities. Comprehensive Flowchart Analysis Cash Disbursements Employee Supervisor Payroll Clerk Time Card Time Card Time Card
Describe the internal control improvements to the system that are needed to reduce these risks. Problem 6 Payroll Flowchart Analysis Supervisor Time Cards Payroll Department Time Cards Personnel Action Flaview and Prepare Parsonnel Action Prepare Cheda and Update Records Time Cards Personnel Action
Payroll Flowchart Analysis Discuss the risks depicted by the payroll system flowchart on page
Human Resource Data Management In a payroll system with real-time processing of human resource management data, control issues become very important. List some items in this system that could be very sensitive or controversial. Also describe what types of data must be carefully guarded to ensure
Fixed Asset System The treatment of fixed asset accounting also includes accounting for mineral reserves, such as oil and gas, coal, gold, diamonds, and silver.These costs must be capitalized and depleted over the estimated useful life of the asset. The depletion method used is the units of
The time to drill a well from start to completion may vary from 3 to 18 months, depending on the location. Further, the costs to drill two or more wells may be difficult to separate. For example, the second well may be easier to drill because more is known about the conditions of the field or
Payroll Procedures When employees arrive for work at Harlan Manufacturing, they punch their time cards at a time clock in an unsupervised area. Mary, the time-keeping clerk, tries to keep track of the employees but is often distracted by other things. Every Friday, she submits the time cards to
Green Leaf Produce Company—Comprehensive Case(Prepared by Glenn Adams and Nausheena Rahim, Lehigh University)Green Leaf Produce Company, a wholesale distributor nestled in the coal-mining regions of Pennsylvania, generates revenues of $90 million per year and currently employs 187 people while
Orbits—Comprehensive Case(Prepared by Jaime Hesser, William Levien, and Rachel Sapir, Lehigh University)In 1997, J.D. Orbits opened a cell phone accessory manufacturing plant named Orbits.Although the company began its operations at the local level with only 40 employees, 3 vendors, and 5 main
Sinclair’s Chair Company—Payroll Systems(Prepared by Sam Succop, Lehigh University)Sinclair’s Chair Company (SCC) was established in 1951 as a family-run manufacturer of plastic chairs, largely distributed to small universities and colleges. It has three manufacturing plants, located in
Green Mountain Coffee Roasters, Inc.—Payroll and Fixed Asset Systems(Prepared by Christina Brown, Lehigh University)Company Background Green Mountain Coffee Roasters, Inc., was founded in 1981 and began as a small cafe in Waitsfield, Vermont, roasting and serving premium coffee on the premises.
Music Source, Inc.—Payroll and Fixed Assets(Prepared by Jeff Davis, Gen Feldman, and Denise Nuccio, Lehigh University)Company Information Music Source, Inc., is a manufacturer of stereo equipment with six sales offices nationwide and one manufacturing plant in Pennsylvania.Currently, employment
A&V Safety, Inc.—Payroll Processing System(Prepared by Aneesh Varma, Lehigh University)Supervisors collect and check time cards (including those from interns during the summer).These are then sent to the payroll department. Based on the employee ID on the time cards, the wage rates are pulled
Walker Books, Inc.—Payroll and Fixed Asset Systems(Prepared by Alex Moser, Lehigh University)Walker Books, Inc., is currently one of the largest book distributors in the United States.Established in 1981 in Palo Alto, California, Walker Books was originally a side project of founder and current
Fixed Asset System Fittipaldi Company recently purchased a patent for a radar detection device for $8 million.This radar detection device has been proven to detect three times better than any existing radar detector on the market. Fittipaldi expects four years to pass before any competitor can
Internal Control Discuss any control weaknesses found in the flowchart on the next page. Recommend any necessary changes. Internal Control Personnel Production Payroll Accounts Cash Payable Disbursements New Employee Forms New Employee Forms Terminated Employee Forms Terminated Employee Forms Time
Explain why the EOQ is the intersection of the ordering-cost curve and the carrying-cost curve.
Automotive Component Corporation—Activity-Based Costing Case(Prepared by Trey Johnston, Lehigh University)Automotive Component Corporation (ACC)began in 1955 as a small machine shop supplying the Big Three automakers. The business is now a $2 billion component manufacturing firm. During the three
World-Class Companies Visit your school’s library (either in person or online) and perform a search on the keywords world-class companies and manufacturing.Find five companies that claim to be worldclass manufacturing companies and state the innovation(s) these companies have undertaken to become
Economic Order Quantity Out Camping is a manufacturer of supplies and has several divisions, one of which is the tent division that produces the deluxe tent Away From Home. Fourteen thousand of these tents are made each year. This model of tent incorporates two zipping doors in each model. Zippers
Document Flowchart Diagram the sequence in which the following source documents are prepared.a. bill of materialsb. work orderc. sales forecastd. materials requisitione. move ticketf. production schedule g. route sheet
Which one of the following statements is true?a. ERP evolved directly from MRP.b. ERP evolved into MRP and MRP evolved into MRP II.c. MRP II evolved from MRP and MRP II evolved into ERP.d. None of the above is true.
Which of the following is NOT a problem associated with standard cost accounting?a. Standard costing motivates management to produce large batches of products and build inventory.b. Applying standard costing leads to product cost distortions in a lean environment.c. Standard costing data are
Which of the following is NOT a principle of lean manufacturing?a. Products are pushed from the production end to the customer.b. All activities that do not add value and maximize the use of scarce resources must be eliminated.c. Achieve high inventory turnover rate.d. A lean manufacturing firm
Which line segment represents the length of time to consume the total quantity of materials ordered?a. DEb. BCc. ACd. AEe. AD
Internal Control Examine the flowchart below and determine any control threats. Specifically discuss the control problems, the possible dangers, and any corrective procedures you would recommend.
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