Question

Apple Case- Segregation of Duties

Apple sells all products on 30 day trade credit. Ernst & Young CPAs is performing an audit of Apple and is becoming familiar with the department documents of the beverage wholesaler. Ernst & Young CPAs is hoping that they can reduce control risk to a minimum level but only if control activities are found which include segregation of duties and safeguarding of assets. For each numbered item choose which department within the organization is likely to perform each task for proper internal control. Choose only 1 department. If the department is not listed, choose “None Of The Above”.

List 1

Billing-Revenue Cycle

Sale-Revenue Cycle

Credit-Revenue Cycle

Shipping-Revenue Cycle

Receiving-Expenditures Cycle-unless Returns

Warehouse-Expenditues and Revenue Cycles

Vouchers Payable-Expenditures Cycle

Accounts Receivable-Revenue Cycle

Cash Disbursements-Expenditures Cycle

Human Resources

Payroll

None Of The Above

1. In the Revenue Cycle, the department that should not be allowed to authorize a bad debt write-off once permission is granted.      __________________________ department
2. In the Payroll Cycle, the department that maintains hiring date, department, salary, and position. _______________________department
3. In the Revenue Cycle, the department that should approve the sales order before the goods are shipped to the customer. ___________________________ department
4. In the Expenditure Cycle, the department that should approve the voucher and record payment to the vendor after the payment is made but should not be allowed to mail the check. ____________________________ department
5. In the Revenue Cycle, the department that should prepare the sales invoice is the _________________ department
6. In the Expenditures Cycle, the department that should receive a “blind copy” of the purchase order (has item ordered information but not quantities ordered) and prepare a document indicating what goods arrived from the vendor_____________________________ department
7. In the Payroll Cycle, what department should approve hours worked including overtime hours. __________________________
8. In the Payroll Cycle, the department that should handout payroll checks to employees that do not receive direct deposit. _________________________________
9. In the Revenue Cycle, the department that should only be allowed to move goods within the company and not send goods outside to the customer. ______________________________
10. In the Expenditure Cycle, the department that should match up the purchase order and receiving report. _________________________________

Answer 1

ANSWER:

1. In the Revenue Cycle, the department that should not be allowed to authorize a bad debt write-off once permission is granted. SHIPPING - REVENUE CYCLE department
2. In the Payroll Cycle, the department that maintains hiring date, department, salary, and position. HUMAN RESOURCES department
3. In the Revenue Cycle, the department that should approve the sales order before the goods are shipped to the customer. BILLING - REVENUE CYCLE department
4. In the Expenditure Cycle, the department that should approve the voucher and record payment to the vendor after the payment is made but should not be allowed to mail the check. Vouchers Payable-Expenditures Cycle department
5. In the Revenue Cycle, the department that should prepare the sales invoice is the BILLING - REVENUE CYCLE department
6. In the Expenditures Cycle, the department that should receive a “blind copy” of the purchase order (has item ordered information but not quantities ordered) and prepare a document indicating what goods arrived from the vendor Warehouse-Expenditues and Revenue Cycles department
7. In the Payroll Cycle, what department should approve hours worked including overtime hours. PAYROLL
8. In the Payroll Cycle, the department that should handout payroll checks to employees that do not receive direct deposit. Vouchers Payable-Expenditures Cycle
9. In the Revenue Cycle, the department that should only be allowed to move goods within the company and not send goods outside to the customer. BILLING - REVENUE CYCLE
10. In the Expenditure Cycle, the department that should match up the purchase order and receiving report. None Of The Above