1. What are the inherent limitations to Internal control are best described in the following cases?...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. What are the inherent limitations to Internal control are best described in the following cases? Justify your answer with sufficient explanation. (a) Ahmed is working as an accountant of GNM Company and in preparing the financial statements of the year ended December 31, 2020. Mr. Salim the General Manager of the GNM Company is going to complete his employment contract and wanted to get appreciation from the Board of directors so that he will be continued in his position. For this purpose, he instructed Ahmed to understate the total expenses and overstate the total sales to show higher profits for the company. (b) Mr. Khalid is a Director of GNM Company and he was assigned the task of appointing an accountant for the Company. Mr. Khalid appointed Mr. Husam as the Accountant of the company. Mr. Husam doesn't have adequate qualifications and experience in accounting field and Mr. Khalid didn't enquire about this information before Husam's appointment. Mr. Husam did lot of mistakes in entering transactions and maintaining accounting records and due to this reason, the preparation of financial statements was delayed. 2. Answer the following questions: (3 Marks) a) ABC Company is maintaining accounting records for cash and inventory and periodically comparing the actual cash and inventory available with the concerned accounting records to protect them from frauds by dishonest employees. Identify the control activity followed by ABC Company in this case. b) Mr. Ahmed, an auditor, would like to check whether the internal control procedures relating to inventory management especially inventory counting process at the end of the year. In this regard, he went to the stores of the company and looked into the process of inventory counting process conducted at the end the year. Identify the test of control performed by the auditor in this case. c) Mr. Aktam, an auditor, found suspect that there are some mistakes in Accounts Receivable records of Al Marai Company. He decided to prepare reconciliation statement which reconciles the accounts receivable records with customers' statements. Identify the test of control performed by the auditor in this case. 1. What are the inherent limitations to Internal control are best described in the following cases? Justify your answer with sufficient explanation. (a) Ahmed is working as an accountant of GNM Company and in preparing the financial statements of the year ended December 31, 2020. Mr. Salim the General Manager of the GNM Company is going to complete his employment contract and wanted to get appreciation from the Board of directors so that he will be continued in his position. For this purpose, he instructed Ahmed to understate the total expenses and overstate the total sales to show higher profits for the company. (b) Mr. Khalid is a Director of GNM Company and he was assigned the task of appointing an accountant for the Company. Mr. Khalid appointed Mr. Husam as the Accountant of the company. Mr. Husam doesn't have adequate qualifications and experience in accounting field and Mr. Khalid didn't enquire about this information before Husam's appointment. Mr. Husam did lot of mistakes in entering transactions and maintaining accounting records and due to this reason, the preparation of financial statements was delayed. 2. Answer the following questions: (3 Marks) a) ABC Company is maintaining accounting records for cash and inventory and periodically comparing the actual cash and inventory available with the concerned accounting records to protect them from frauds by dishonest employees. Identify the control activity followed by ABC Company in this case. b) Mr. Ahmed, an auditor, would like to check whether the internal control procedures relating to inventory management especially inventory counting process at the end of the year. In this regard, he went to the stores of the company and looked into the process of inventory counting process conducted at the end the year. Identify the test of control performed by the auditor in this case. c) Mr. Aktam, an auditor, found suspect that there are some mistakes in Accounts Receivable records of Al Marai Company. He decided to prepare reconciliation statement which reconciles the accounts receivable records with customers' statements. Identify the test of control performed by the auditor in this case.
Expert Answer:
Answer rating: 100% (QA)
a The control activity followed by ABC Company in this case is known as Reconciliation Reconciliation is a process of comparing the actual cash and in... View the full answer
Posted Date:
Students also viewed these mathematics questions
-
A junior CPA at Depaul, CPAs currently is working as an audit team member on the audit of General Molecular. This CPA is about to search for a different position of employment If this individual is...
-
In preparing the financial statements for the year ended 30 June 2018 the accountant of Windsor Ltd, a tobacco manufacturer and wholesaler, has come to you with the following information and request...
-
In preparing the financial statements for the year ended 31 December 20X5 Alpha plc discovers the following, all of which are material in the context of the company's results: Development...
-
Draw the BST that results when you insert the keys E A S Y QUE S T I O N in that order into an initially empty tree. What is the height of the resulting BST?
-
1. Suppose you use about 500 GB (0.5 TB) of storage in your personal system, filling about two-thirds of its 750 GB disk. Most of that storage is used by your video library. Photos, music, and...
-
In 1952, the estate of George Bernard Shaw granted to Gabriel Pascal Enterprises, Limited, the exclusive rights to produce a musical play and a motion picture based on Shaws play Pygmalion. The...
-
The following information is taken from Procter & Gambles 2015 annual report: Calculate the companys actual and sustainable rate of growth in sales for 2015 and 2014. How do the two growth rates...
-
Lexington Chemicals Inc., which uses the process cost system, has two departments: A and B. In both departments, all of the materials are put into production at the beginning of the process. The...
-
Assignment : Case study - Hotel Answer the questions in detail. 1. Brand managers of services often complain that their job seems more difficult than being a brand manager for, say, a sneaker. How...
-
Micro Technologies sells two products: X and Y. The selling price, variable cost, and sales mix for the products are presented in the table below. Product Unit Sales Price Unit Variable Cost...
-
Using array implementation make a Stack and Queue program that takes user input and creates a stack list of them.
-
Lem E Tweakit Inc. is considering the purchase of a new magic marker machine. This machine will reduce manufacturing costs by $6,000 annually. The new machine will be in CCA class 8 (d = 20%). The...
-
A bar of length 1 moves in plane. In the displayed position, the velocity v of point A and the angular velocity ware known. a) Determine the magnitude and direction of the velocity of point B. b)...
-
16 points Save Answer Corcoran Corporation acquired machinery & equipment on January 1, 2018. The company paid $50,000 for the machinery & equipment. In addition the company paid $3,000 for shipping,...
-
Question One ATEC Ltd is a player in the local market. The company's common stock is trading at sh 65 per share. The company's most recent is sh 3 per share. The required rate of return on...
-
If the cost of equity capital is 15% p.a., the market value of equity is $5 million, the company tax rate is 30%, the cost of debt is 12% p.a. and y = 0.60, what is the cost of capital?
-
The following table shows data on the relationship between a worker's years of education and the salary he or she is likely to earn. Education Salary (Years) (Thousands of dollars per year) 4 15 8 25...
-
You are a U.S. investor who purchased British securities for 2,000 one year ago when the British pound cost U.S. $1.50. What is your total return (based on U.S. dollars) if the value of the...
-
Define and explain diminishing marginal utility.
-
Can we make interpersonal utility comparisons?
-
What is utility?
Study smarter with the SolutionInn App