Horngren's Accounting (11th Edition)
11th Edition
ISBN: 9780133856781
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 8, Problem P8.22APGA
Correcting internal control weakness
Each of the following situations has an internal control weakness.
- Upside-Down Applications develops custom programs to customer's specifications. Recently, development of a new program stopped while the programmers redesigned Upside-Down's accounting system. Upside-Downs accountants could have performed this task.
- Norma Rottler has been your trusted employee for 24 years. She performs all cash-handling and accounting duties. Ms. Rottler just purchased a new luxury car and a new home in an expensive suburb. As owner of the company, you wonder how she can afford these luxuries because you pay her only $30,000 a year and she has no source of outside income.
- Izzie Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Izzie later went bankrupt and could nor repay the bank.
- The office supply company where Pet Grooming Goods purchases sales receipts recently notified Pet Grooming Goods that its documents were not pre-numbered. Howard Mustro, the owner, replied that he never uses receipt numbers.
- Discount stores such as Gusto make most of their sales in cash, with the remainder in credit card sales. To reduce expenses, one store manager ceases purchasing fidelity bonds on the cashiers,
- Cornelius’s Corndogs keeps all cash receipts in an empty box for a wick because the owner likes to go to the hank on Tuesdays when Joann is working.
Requirements
- Identify the missing internal control characteristics in each situation.
- Identify the possible problem caused by each control weakness.
- Propose a solution to each internal control problem.
Expert Solution & Answer
Learn your wayIncludes step-by-step video
schedule09:28
Students have asked these similar questions
Correcting internal control weakness
Each of the following situations has an internal control weakness.
Upside-Down Applications develops custom programs to customer’s specifications. Recently, the development of a new program stopped while the programmers redesigned Upside-Down’s accounting system. Upside-Down’s accountants could have performed this task.
Norma Rottler has been your trusted employee for 24 years. She performs all cash- handling and accounting duties. Ms. Rottler just purchased a new luxury car and a new home in an expensive suburb. As an owner of the company, you wonder how she can afford these luxuries because you pay her only $30,000 a year and she has no source of outside income.
Izzie Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Izzie later went bankrupt and could not repay the bank.</p> <p>d. The office supply company where Pet Grooming Goods purchases sales receipts…
1. A new systems development project is being planned for Reindeer Christmas Supplies Company. The invoicing, cash receipts, and accounts payable modules are all going to be updated. The controller, Kris K. Ringle, is a little anxious about this project. The last systems development project that affected his department was not very successful, and the employees in the accounting department did not accept the new system very well at first. He feels that the systems personnel did not interact sufficiently with the users of the systems
in the accounting department. Prepare a memo from Ringle to the head of the information systems department, Sandy Klaus. In this memo, provide some suggestions for including the accounting personnel in the systems development project.
Give persuasive arguments as to why prototyping would be helpful to the workers in the accounting department.
Systems Planning A new systems development project is being planned for the Reindeer Christmas Supplies Company. The invoicing, cash receipts, and accounts payable modules are all going to be updated. The controller, Kris K. Ringle, is a little anxious about this project. The last systems development project that affected his department was not very successful,and the employees in the accounting department did not accept the new system very well at first. He feels that the systems personnel did not interact sufficiently with the users of the systems in the accounting department. Prepare a memo from Ringle to the head of the information systems department, Sandy Klaus. In this memo, provide some suggestions for including the accounting personnel in the systems development project. Give some very persuasive arguments why prototyping would be helpful to the workers in the accounting department.
Chapter 8 Solutions
Horngren's Accounting (11th Edition)
Ch. 8 - Which of the following is not part of the...Ch. 8 - Prob. 2QCCh. 8 - Prob. 3QCCh. 8 - Prob. 4QCCh. 8 - Prob. 5QCCh. 8 - Prob. 6QCCh. 8 - Prob. 7QCCh. 8 - Prob. 8QCCh. 8 - Prob. 9QCCh. 8 - Prob. 10QC
Ch. 8 - Prob. 11QCCh. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - What are the five components of internal control?...Ch. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - What are the steps taken to ensure control over...Ch. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - Prob. 15RQCh. 8 - Prob. 16RQCh. 8 - Prob. 17RQCh. 8 - Prob. S8.6SECh. 8 - Prob. S8.7SECh. 8 - Prob. S8.8SECh. 8 - Prob. S8.9SECh. 8 - Prob. S8.10SECh. 8 - Prob. S8.11SECh. 8 - E8-13 Identifying internal controls Learning...Ch. 8 - Prob. E8.13ECh. 8 - Prob. E8.14ECh. 8 - Understanding internal control, components,...Ch. 8 - Prob. E8.16ECh. 8 - Prob. E8.17ECh. 8 - Prob. E8.18ECh. 8 - Prob. E8.19ECh. 8 - Prob. E8.20ECh. 8 - Prob. P8.21APGACh. 8 - Correcting internal control weakness Each of the...Ch. 8 - Prob. P8.23APGACh. 8 - Prob. P8.24APGACh. 8 - Prob. P8.25APGACh. 8 - Prob. P8.26APGACh. 8 - Prob. P8.27BPGBCh. 8 - Prob. P8.28APGACh. 8 - Prob. P8.29BPGBCh. 8 - Prob. P8.30BPGBCh. 8 - Prob. P8.31BPGBCh. 8 - Prob. P8.32BPGBCh. 8 - Prob. P8.33CPCh. 8 - Prob. P8.34PSCh. 8 - Prob. 8.1DCCh. 8 - Prob. 8.2DCCh. 8 - Prob. 8.1FCCh. 8 - Prob. 8.1FSC
Additional Business Textbook Solutions
Find more solutions based on key concepts
Account for mortgages. (LO 3). Curtain Company borrowed $10,000 at 9% for seven years. The loan requires annual...
Financial Accounting
(Learning Objective 1) Which of the following types of companies would have work in process inventory? a. Servi...
Managerial Accounting (5th Edition)
Define cost object and give three examples.
Cost Accounting (15th Edition)
Net Operating Loss, Carryforward, Tax Rate Change. Hamilton Container Company reported the following income (lo...
Intermediate Accounting
What type of qualitative issues should management consider if a quantitative analysis reveals that a segment sh...
Principles of Accounting Volume 2
Quick ratio (Learning Objective 7) 510 min. Calculate the quick assets and the quick ratio for each of the foll...
Financial Accounting, Student Value Edition (4th Edition)
Knowledge Booster
Similar questions
- 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 prepares payroll checks and maintains the general journal. Iris is seriously considering switching to a computerized system. With so many information system packages on the market, Iris is overwhelmed. Advise Iris as to which business modules you think her organization could find beneficial. Discuss advantages, disadvantages, and internal control issues.arrow_forwardANNOUNCING A NEW INFORMATION SYSTEM The AJAX Company is considering implementing a new accounting system, which will automate sales processing, cash receipts, accounts payable, and cash disbursement procedures. Roger Moore, AJAXs CIO sent an announcement letter to the AJAX community. In the letter, Moore said: I have contracted with Spartan Consulting Group to do the needs analysis, system selection, and design work. The programming and implementation will be performed in-house using existing IT department staff. The development process will be unobtrusive to user departments because Spartan knows what needs to be done. They will work independently, in the background, and will not disrupt departmental and internal audit work How with time-consuming interviews, surveys, and questionnaires. This promises to be an efficient process that will produce a system that will be appreciated by all users. Required Draft a memo from George Jones, Director of Internal Audits, in response to Moores letter.arrow_forwardAscendex Sdn Bhd is an online company that supplies a range of IT products. Its product line includes IT hardware and software. Their main customers are government agencies and private company. The company employs a combination of manual procedures and a networked accounting system with distributed terminals in several departments. After years of satisfactory performance, however, Ascendex Sdn Bhd is now experiencing operational inefficiencies and accounting errors. Your firm has been hired to evaluate Ascendex’s business processes and internal controls. Ascendex’s expenditure cycle is described in the following paragraphs. PURCHASE SYSTEM PROCEDURES Ascendex’s transactions are initiated when the purchasing department clerk reviews the inventory file for items that need to be replenished. The clerk selects a vendor, adds a record to the digital purchase order (PO) File, and prints four hard copies of the PO. One copy is filed in the department; the second copy is sent to the receiving…arrow_forward
- Jacqueline Mensah, manager of Expert Building Company, is a valued and trusted employee. She has been with the company from its start two years ago. Because of the demand of her job, he has not taken a vacation since she began working. She is in charge of recording collections on account, making the daily bank deposits, and reconciling the bank statement. Late last year, clients began complaining to you, the Managing Director, about incorrect statements. As Managing Director, you want to investigate this matter. Jacqueline tells you there is nothing to worry about. The problem is due to the slow mail: customers payments and statement are crossing in the mail. Because clients were not complaining last year, you doubt the mail is the primary reason for the problem. Required: What might be some of the reasons for the delay? What should be done to make sure the problems are avoided in the future?arrow_forwardThis year you obtain a new client, Lee Corporation, a regional distributor of appliances. Before becoming your client, Lee had installed a microcomputer-based accounting system to handle its receivable, payables general ledger and payroll. Lee purchases its microcomputer with off-the-shelf software and appears very pleased with it. You notice that the computer sits on the bookkeeper’s desk. You ask Christian Lee, the president, about his feelings about the computer system, and he states:“The system is absolutely great. It has already saved us a lot of time and money. I get reports when I want them, not days later. In fact, it is so good, why don’t you try it? The password is LEE. You can go ahead and use it. If you want any backup files, they are stored in the supply room. We sure saved a lot of money by purchasing the system from a mail-order operation. A system analyst wanted P15,000 to help pick the best system for us, and a local dealer wanted P11,000 more for comparable hardware…arrow_forwardThis year you obtain a new client, Lee Corporation, a regional distributor of appliances. Before becoming your client, Lee had installed a microcomputer-based accounting system to handle its receivable, payables general ledger and payroll. Lee purchases its microcomputer with off-the-shelf software and appears very pleased with it. You notice that the computer sits on the bookkeeper’s desk. You ask Christian Lee, the president, about his feelings about the computer system, and he states: “The system is absolutely great. It has already saved us a lot of time and money. I get reports when I want them, not days later. In fact, it is so good, why don’t you try it? The password is LEE. You can go ahead and use it. If you want any backup files, they are stored in the supply room. We sure saved a lot of money by purchasing the system from a mail-order operation. A system analyst wanted P15,000 to help pick the best system for us, and a local dealer wanted P11,000 more for comparable…arrow_forward
- "Dennis Jones, an old college friend, contacted you last week. Dennis owns several car washes, and he believes that financial statement fraud may be occurring. (He pays each car wash manager a bonus if a certain level of profits is earned and is worried that some managers are overstating profits to earn a higher bonus.)Dennisiscomingovertoday to see whether you can help him determine if his suspicions are valid. He is bringing along the financial statements for each car wash (income statements, balance sheets, and cash flow statements) for the last five years.1.What kind of financial statement analysis could you perform to help Dennis detect possible fraud?"arrow_forwardBoxes-and-Stuff, a box-packing and mailing company in a small town along the Gulf Coast, lost a key employee last month when its accounting manager was fired for embezzling company money. Now, the owners of Boxes-and-Stuff, Jerome and Natalia, need to find another accounting manager fast. But as they hurry to fill the position, they don't want to select a dishonest or incompetent employee. They need to be cautious. Fortunately, the police chief found the embezzled funds in a bank account set up by the former employee and authorized the return of the money. This means that Boxes-and-Stuff will not lose the embezzled amount, after all. However, Jerome and Natalia are already thinking of ways to protect their company from other risks. They want to be prepared for risky situations in the future. Questions: 1. Which risks do you think Boxes-and-Stuff might face?arrow_forwardB. Harper is surfing the Internet and finds a great pair of rollerblades at a really low price, but he has never heard of the company and is concerned that the product he ordered may not be the product he receives. Harper may be more willing to place an order with this company ifa. The website displays the WebTrust seal.b. The company provides its annual report and the report of the independent auditors on its website.c. The company provides a money-back guarantee.d. Only a partial payment is required prior to receiving the product.arrow_forward
- Boxes-and-Stuff, a box-packing and mailing company in a small town along the Gulf Coast, lost a key employee last month when its accounting manager was fired for embezzling company money. Now, the owners of Boxes-and-Stuff, Jerome and Natalia, need to find another accounting manager—fast. But as they hurry to fill the position, they don’t want to select a dishonest or incompetent employee. They need to be cautious. Fortunately, the police chief found the embezzled funds in a bank account set up by the former employee and authorized the return of the money. This means that Boxes-and-Stuff will not lose the embezzled amount, after all. However, Jerome and Natalia are already thinking of ways to protect their company from other risks. They want to be prepared for risky situations in the future. 1. Which risks do you think Boxes-and-Stuff might face? 2. How do you think the company should handle the risks you’ve identified?arrow_forwardNetbooks Inc. provides accounting applications for business customers on the Internet for a monthly subscription. Netbooks customers run their accounting system on the Internet; thus, the business data and accounting software reside on the servers of Netbooks Inc. The senior management of Netbooks believes that once a customer begins to use Netbooks, it is very difficult to cancel the service. That is, customers are “locked in” because it isdifficult to move the business data from Netbooks to another accounting application even though the customers own their own data. Therefore, Netbooks has decided to entice customers with an initial low monthly price that is half the normal monthly rate for the first year of services. After a year, the price will be increased to the regular monthly rate.Netbooks management believes that customers will have to accept the full price because customers will be “locked in” after one year of use.a. Discuss whether the half-price offer is an ethical…arrow_forwardTHE CONFUSED ACCOUNTANT Yvonne Pillar is a young accountant who came from a poor family. She was recently hired by a big company called Chameleon Co. When it was time to audit the accounting books of the company, Yvonne was instructed by her boss to manipulate the numbers in order to reduce taxes the company will have to pay the government. The company official said that if she would not heed the command, she would be terminated. The employment condition that time was really tight and the chances of finding another job are very minimal. Questions : 1.)if you were Yvonne Pillar, will you obey your boss? Why or why not? 2.) Are morally obligated to follow an order that is illegal?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning