Accounting 504 Week 5 Case Study

In: Business and Management

Submitted By clmotes
Words 949
Pages 4
Case Study
ACCT504 Acct Fin: Managerial Use Analysis
Devry University
Carmeshia Motes
Professor Melinda Howerton
February 7th, 2016

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.
Missing Internal Control Characteristic:
The important missing factor is that same person is responsible for conducting all the activities of inventory. He or She is responsible for ordering parts, counting the inventory, recording inventory ledger and taking up of annual stock.
Problem of the Firm:
The firm does not have any internal control mechanism to cross check the authenticity of documents and physical inventory of stores. All the duties are being performed by same person, there is no segregation of duties which could prevent or decrease the errors and willful fraud.
Proposed Solution:
Segregation of duties is one of the methods of internal which helps in preventing and reducing the occurrence of frauds and errors. It is done by segregating the duties in a department and by ensuring that no single person is having control on all the transactions. There are four general categories of duties: authorization, custody, record keeping and reconciliation. In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities. The more negotiable the asset, the greater the need for proper segregation of duties - especially when dealing with inventories.

Situation B:
Nicole Lopez handles employee travel and expense…...

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