QUESTION 5 You are working on the Bemco audit. Assume that the questions below are unrelated....

QUESTION 5

You are working on the Bemco audit. Assume that the questions below are unrelated. Bill Wedman, another staff member, has given you the following list of what he refers to as "internal control deficiencies" and has asked you to review each point and make sure that you agree that each is an internal control deficiency.

Agree, this IS a control deficiency.

Disagree, this is NOT a control deficiency.

- A. B.	Voided checks should be so marked (defaced) and retained so as to allow one to know that they have been voided and are not outstanding.
- A. B.	One expects separate sequences of numbers of the various accounts, as one overall sequence for various bank accounts is, at best, unwieldy; establishing control over each sequence is generally adequate.
- A. B.	Since the purchasing department employees approve purchases they should also sign checks.
- A. B.	Checks should not be made payable to cash as they may be cashed by anyone—properly or improperly.
- A. B.	The authorized signers disburse funds and effective oversight of those disbursements requires account reconciliation by another individual.
- A. B.	Cash receipts should be so prelisted.
- A. B.	A policy of restrictively endorsing such receipts (e.g., endorsing the checks as "pay only to Bemco") is a control.
- A. B.	The person signing the check should be the person who perforates (defaces) the checks so as to eliminate the possibility of that support being used again to improperly support another disbursement.

A.	Agree
B.	Disagree

Expert Solution

Agree, as already defaced	Voided checks should be so marked (defaced) and retained so as to allow one to know that they have been voided and are not outstanding.
Agree, as sequencing is a function of accounting package	One expects separate sequences of numbers of the various accounts, as one overall sequence for various bank accounts is, at best, unwieldy; establishing control over each sequence is generally adequate.
Disagree,purchase department can check quantity and quality,but payment check should be signed and issued at finance only.	Since the purchasing department employees approve purchases they should also sign checks.
Agree, all payment checks should be crossed and made payable to account.	Checks should not be made payable to cash as they may be cashed by anyone—properly or improperly.
Disagree, because once a fund is disbursed, it can’t be retrived, so all checking and reconciliation should be before signing and disbursements.	The authorized signers disburse funds and effective oversight of those disbursements requires account reconciliation by another individual.
Agree, prelisting / sequencing of the cash receipt should always be good to track.	Cash receipts should be so prelisted.
Agree, it will restrict the payment of the check.	A policy of restrictively endorsing such receipts (e.g., endorsing the checks as "pay only to Bemco") is a control.
Agree, it will maintain the confidence of the signing person on the disbursement process.	The person signing the check should be the person who perforates (defaces) the checks so as to eliminate the possibility of that support being used again to improperly support another disbursement.

ekkarill92 answered 1 year ago

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