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Each of the following situation has a internal weakness

Each of the following situation has a internal weakness
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Solution Guide / Answer Key:


Correcting Internal Control Weakness

Each of the following situation has a internal weakness.

a. Rite-way applications sells accounting software. Recently development of a new program stopped while the programmers redesigned Rite-Way’s accounting system. Rite-Way’s accountants could have performed this task.

b. Betty Grable has been your trust employee for 30 years. She performed all cash handling and accounting duties. Ms Grable just purchased a new Lexus and a new home in an expensive suburb. As owner of the company, you wonder how she can afford these luxuries because you pay her $35,000 a year and she has no source of outside income.

c. Sanchez Hardwoods, a private company, falsified sales and inventory figures in order to get an important loan. The loan went through, but Sanchez later went bankrupt and could not repay the bank.

d. The office supply company where Champs Sporting Goods purchases sales receipts recently notified Champs that its document were not renumbered. Alex Champ, the owner, replies that he never use receipt numbers.

e. Discount store such as Tallon make most of their sales of cash, with the remainder in credit-card sales. To reduce expenses, one store manger ceases purchasing fidelity bonds on the cashiers.

f. Bob’s Burger House keeps all cash received from sales in a safe because Bob thinks banks are not “safe”.

1. Identify the missing internal control characteristics in each situation.
2. Identify the possible problem caused by each control weakness.
3. Propose a solution to each internal control problem.



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