Case Study 2 (Learning Objectives 2, 4: Explain the components of internal control; evaluate internal controls) Each of the following situations reveals an internal control weakness: Situation a. In evaluating the internal control over inventory for the Williams Oil Services Company, an auditor learns that the warehouse receiving clerk is responsible for ordering parts for supply inventory use in drilling services, counts the inventory when received at the dock, records the receipts into the inventory ledger, and takes the annual inventory, No supervisor reviews the receiving clerk’s work. Here in the above situation the missing internal characteristic is segregation of duties. As mentioned only single person will be carrying out the duties of ordering parts for drilling, counting the received parts, recording the receipts into inventory ledger and takes the annual inventory and since there is no supervisor or superior to watch over the work of the clerk the risk for fraud is more. This might result in the wrong usage of the power given to clerk in handling all the activities right from ordering parts to taking annual inventory.
Company’s in the IPO process and newly public companies are not required to provide either a management assessment or an auditor attestation report until they file their second annual report with the SEC. While companies in the IPO process are not required to comply with these regulations, in order to prepare for these certifications and audit, it is important to establish, document, and monitor compliance of internal controls as early as possible. 2. One practice the LJB is doing right and should continue to do is the use of pre-numbered invoices. This prevents transactions from being skipped over or recorded more than once.
Establishing Responsibility: It is important to designate only one individual to handle specific tasks. Your accountant is the assigned individual to process checks, complete bank reconciliation and purchase supplies. Limiting access reduces fraud and maintains confidentiality. Documentation Procedures: Using pre-numbers invoices
All other accounting literature will be considered non authoritative, which are not covered by the FASC. 3. Goals aimed by the FASB while developing the Coding Standards: * Gathering all authoritative US GAAP in one location, thus render easier access to users * Ensuring codified contents accurately reflect US GAAP as of July 1, 2009 * Engineering an up-to-date codified system, coherent with the released results of standard-setting activity 4. Topics used in ASC: 1. Financial Accounting Standards Board (FASB) a.
Accrual and Cash Accounting The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. The cash method is most used by small businesses and for personal finances. The cash method accounts for revenue only when the money is received and for expenses only when the money is paid out. On the other hand, the accrual method accounts for revenue when it is earned and expenses goods and services when they are incurred. The revenue is recorded even if cash has not been received or if expenses have been incurred but no cash has been paid.
Discuss how Greater Providence Deposit & Trust might improve its control procedures over the disbursement of loan funds to minimize the risk of this type of fraud. In order for any organization to avoid any type of fraud would be to have good internal controls in place. Good internal control requires that no single employee be given too much responsibility over business transactions or processes (Romney & Steinbert 2010). An employee should never be given the opportunity to be in a position to commit and conceal fraud. In the case of Greater Providence Deposit & Trust the organization did not have proper internal controls in place.
4. AVOID SUBJECTIVE OPINION OF FELLOW GEOLOGIST Section 5. A Geologist shall not express any professional opinion, which reflects on the ability or integrity of any person or organization, unless his responsibility to the profession and the community requires him to do so. 6. NO FALSITY OF INFORMATION Section 7.
This means that the owner of a business should not place any personal assets on the business balance sheet. The balance sheet of the business must reflect the financial position of the business alone. Also, when transactions of the business are recorded, any personal
Also the CPA firm cannot perform any more consulting or accounting services for the audit client since it is not allowed under the PCAOB audit standards. b. The auditors would have to complete the registration of the company with the SEC via Form S-1, file quarterly financials on Form 10-Q, and then file the annual fiscal year's financial statements via Form 10K in addition to the annual audited financial statements. Problem 3-23 a. 2) b.
There’s no rule, no unified concept and standard, of course no reference. Leaders will solely measure the situation base on their own judgments. They change their behaviors by experience, and personal way. The only one thing to consider is the effectiveness. There are no specific patterns, it doesn’t mean no reference.