Question

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Learning Objective 3 E7-15 Evaluating internal control over cash payments Gary's Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary's, verifies receipt of merchandise and then pre- pares, signs, and mails the check to the vendor. Requirements 1. Identify the internal control weakness over cash payments. 2. What could the business do to correct the weakness?

Answer 1

Answers Zvered Contrelin 1 This is nothing but the method which is used to eliminate the material error is the preparation of financial Statements by asceartaining the consistency of the accounting documents to safeguard the assets of the Company l. In this case there is a chance for misrepresenting the transaction. So, there is a chance to theft of cash and inventory because of the weaknes in the internal Control over Cash payment the accountant.. himself receive goods, prepares that goods & sign & mails the checks to vender, so, there is a chance.

there are some contxol porocedures to correct the weakness. those are as follows. » The accountant should not place the order. receive the purchase order from the but Purchasing agent. The payment approval & mail the check after Checking the documents like perchase order invoice .. should be done by the authorized officials. > To do The receiving department should verify the invoice & check the merchandise inventory & quantity & send the receruing report to closure After receiving the report from Grocerving department then only the accountant should arrange the payment 3. §