Unit 5 Ac499 Bachelors Capstone In Accounting Assignment

Unit 5 Ac499 Bachelors Capstone In Accountingunit 5 Assignment Ga

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: (1) The control environment, (2) Risk assessment, (3) Control procedures, (4) Monitoring, and (5) Information and communication.

If you owned a business, you would expect your employees to: 1) Work to achieve the business goals and objectives you establish. 2) Use business assets (such as machinery or automobiles) only for legitimate business purposes and avoid wasting business resources. 3) Record accurate data regarding business transactions so you could accurately judge how well your business is doing. 4) 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.

Paper For Above instruction

In analyzing the internal control procedures implemented at Quixote Consulting, it is essential to evaluate each of the eight procedures to identify potential strengths and weaknesses. For each, I will provide an assessment based on the principles of internal control to determine how well these procedures safeguard assets, ensure accurate financial reporting, and promote compliance with laws and regulations.

Scenario A

Scenario A involves the preparation of the bank reconciliation by the cashier, who works under the supervision of the treasurer. This setup presents a weakness because having the cashier responsible for the reconciliation could compromise objectivity, especially if the cashier has access to sensitive financial information. It is a strength that the cashier operates under supervision, but ideally, the reconciliation should be performed by an individual independent of cash handling to reduce risk of fraud or error. To strengthen this control, the bank reconciliation should be performed by an employee in the internal audit or accounting department who is independent of cash collections and disbursements, and the process should be reviewed periodically by a supervisor or internal auditors.

Scenario B

Scenario B states that all mail is opened by the mail clerk, who forwards all cash remittances to the cashier. This is a strength as it limits the access to cash remittances to one person, reducing the risk of misappropriation. However, there's a weakness in that the mail clerk is the only individual handling this cash remittance process; a segregation of duties should be enforced by having another employee verify that the cash reported matches the remittances forwarded. Implementing dual controls, such as having a supervisor review the cash remittance record, would enhance the control environment and decrease the risk of theft or errors.

Scenario C

Scenario C involves cash register clerks using their own funds to cover shortages at the end of the day. This practice is a significant weakness because it places undue pressure on employees and does not serve as a reliable control over cash shortages. It also exposes employees to personal financial risk and could foster dishonest behavior. To correct this, the company should implement a cash shortage fund or perform frequent reconciliations to detect discrepancies promptly. Regular surprise cash counts by management would also serve as an effective control measure.

Scenario D

Scenario D describes that all cash receipts are placed in the bank's night depository at the end of each day, which is a strength because it minimizes the time cash remains unsecured. The use of a night depository ensures that cash is quickly secured and reduces theft risk. Nonetheless, a potential weakness is that cash is only being deposited once daily; if large amounts are collected, there is continued risk until deposit is made. To mitigate this, the business could implement a dual-control process with secure cash transport and periodic cash counts during the day to complement the nightly deposits.

Scenario E

Scenario E describes an accounting clerk comparing the daily cash deposit slip with the bank's deposit receipt. This is a strength as it provides a review process that helps detect discrepancies early. However, the weakness lies in that this control is limited to a comparison by one individual; periodic independent audits of deposit records could reinforce this process. Additionally, supervisory review of the comparisons should be implemented to add an additional layer of oversight and ensure accuracy.

Scenario F

Scenario F states that the accounts payable clerk prepares vouchers for disbursements, which are then forwarded for approval. This process is a strength because it enforces proper authorization before payments are made. To further strengthen this control, it is recommended that supporting documentation be reviewed by a supervisor before voucher preparation to prevent unauthorized disbursements and ensure proper verification of expenses; also, access to voucher preparation should be restricted to authorized personnel.

Scenario G

Scenario G describes that after payment approval, the treasurer signs and mails the check, stamps the voucher as paid, and then returns documents to the accounts payable clerk. This process exhibits strengths in that it consolidates authorization and recording of disbursements, but weaknesses exist in the potential for misplacing or mishandling paid vouchers. Implementing a voucher tracking system, either manually or electronically, could improve accountability and reduce errors. Also, segregation of duties between check signing and voucher stamping could prevent fraudulent activities.

Scenario H

Scenario H involves petty cash expenses that include postage, office supplies, and post-dated employee checks. This presents a weakness because the inclusion of post-dated checks in petty cash could lead to misappropriation or inadequate control over timing and disbursements. To improve control, petty cash funds should be used only for small, incidental expenses, with post-dated checks maintained separate and with clear documentation. Also, periodic counting and audits of petty cash should be performed to ensure accuracy and proper use of funds.

Conclusion

Overall, Quixote Consulting has implemented several sound internal control procedures, but there are notable weaknesses that could be addressed to enhance security and accuracy. Segregation of duties, independent verification, and periodic oversight are critical elements that need reinforcement. By adopting best practices such as independent reconciliations, dual controls, proper documentation, and regular audits, the company can strengthen its internal control framework, safeguard assets, ensure reliable financial reporting, and promote lawful conduct within its operations.

References

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