1)Are liabilities for notes payable incurred only after written authorization by a proper company official?

2)Is a notes payable master file maintained?

3)Is the individual who maintains the notes payable master file someone other than the person who approves the issue of new notes or handles cash?

4)Are paid notes canceled and retained in the company files?

5)Is a periodic reconciliation made of the notes payable master file with the actual notes outstanding by an individual who does not maintain the master file?

6)Are interest expense and accrued interest recomputed periodically by an individual who does not record interest transactions?

REQUIREMENTS:

a. For each of the preceding questions, please write "YES" if it indicates a possible internal control. Then write "NO" if it indicates a potential weakness.

b. For each of the preceding questions, please state the purpose of the control.

c. For each of the preceding questions, please identify the type of financial statement error that could occur if the control were not in effect.

d. For each of the potential errors in requirement b, list an audit procedure that can be used to determine whether a material error exists