Accounting Question

The following Course Outcome is assessed in this unit:AC499-4: Financial Reports: Evaluate financial reports.
Instructions Summary:
Recall that in Units 2 and 3, you completed the accounting cycle for Dustin Larkin of
Quixote Consulting. Quixote Consulting is a part-time consulting business that recently
moved from Dustin’s home into rented quarters.
Assume that you are the internal auditor for the business and you have to evaluate the
internal control procedures that have been implemented in the business.
There are three objectives of internal control:
1. Assets are safeguarded and used for business purposes,
2. Business information is accurate, and
3. Employees comply with laws and regulations.
The five elements of internal control are:
4. The control environment,
5. Risk assessment,
6. Control procedures,
7. Monitoring, and
8. Information and communication.
If you owned a business, you would expect your employees to:
9. Work to achieve the business goals and objectives you establish.
10. Use business assets (such as machinery or automobiles) only for legitimate
business purposes and avoid wasting business resources.
11. Record accurate data regarding business transactions so you could accurately judge
how well your business is doing.
12. Refrain from stealing your cash, supplies, inventory, or property, plant, and
equipment.
In theory, you should be able to expect these things. In practice, however, you must
establish an internal control framework to make sure your business objectives are achieved,
assets are protected from theft and misuse, and financial data are recorded accurately.
The following eight procedures (A–H) were recently installed by Quixote Consulting:
A. The bank reconciliation is prepared by the cashier, who works under the supervision
of the treasurer.
B. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier.
The cashier prepares a listing of the cash receipts and forwards a copy of the list to
the accounts receivable clerk for recording in the accounts.
C. At the end of the day, cash register clerks are required to use their own funds to
make up any cash shortages in their registers.
D. At the end of each day, all cash receipts are placed in the bank’s night depository.
E. At the end of each day, an accounting clerk compares the duplicate copy of the daily
cash deposit slip with the deposit receipt obtained from the bank.
F. The accounts payable clerk prepares a voucher for each disbursement. The voucher
along with the supporting documentation is forwarded to the treasurer’s office for
approval.
G. After necessary approvals have been obtained for the payment of a voucher,
treasurer signs and mails the check. The treasurer then stamps the voucher and
supporting documentation as paid and returns the voucher and supporting
documentation to the accounts payable clerk for filing.
H. Along with petty cash expense receipts for postage, office supplies, etc., several
post-dated employee checks are in the petty cash fund.
Instructions
I.
Indicate whether each of the procedures of internal control represents: (1) a strength
or, (2) a weakness. For each weakness, indicate why it exists and what procedures
should be put into place to alleviate the risk.
J. For each letter, A–H, you should have at least a one paragraph, thoughtful answer
that includes good critical thinking.
K. Your assignment must be submitted in a single Word document.
L. The document must use current APA formatting and include a Title Page, and
references (see Unit 5 Reading, Tab 3, for assistance with APA).
M. Use properly formatted headings to organize your paper.
N. You must include proper references and citations for any content not original to you.
Also, you must use independent references/citations to support any “personal
knowledge” or “personal experience” you include in the analysis. Formal writing does
not recognize your own personal knowledge as “common knowledge.” Therefore,
proper independent support must be included for any assertions made.