HW #4 Review
1. (a) cash received by mail goes straight to the bookkeeper who debits cash & credits accounts receivable
Weak internal controls, not a good separation of duties, the same person receives, records, and
...
HW #4 Review
1. (a) cash received by mail goes straight to the bookkeeper who debits cash & credits accounts receivable
Weak internal controls, not a good separation of duties, the same person receives, records, and
deposits cash
(b) cash received by mail goes to the mail room where a clerk opens and totals cash. Customer checks go to
the cashier for deposit and remittance advices go to the accounting department
Strong internal controls, a good separation of duties, different people receive cash, record the cash &
deposit the cash
(c) policy calls for supervisors to request the equipment then home office purchases the equipment
Strong internal controls, a good separation of duties
(d) supervisors buy the equipment and send receipts to home office for reimbursement
Weak internal controls, not a good separation of duties
2. 4 ways Bixby’s embezzlement could have been prevented
Not permitted Bixby to write checks. Instead appoint a board member to write checks
Supervised Bixby’s work by examining documents such as paid checks
Had an audit of uptown Allentown’s transactions and financial statements
Not permitted Bixby to receive cash that came to uptown Allentown
3. cheesecake factory must implement and enforce an effective internal control system to both comply with
financial reporting regulations and protect its assets. Let’s look at a description of a typical day of a server
Each shift starts with $ 250 cash in the cash register. Upon arriving and starting a shift, a designated server
counts the cash in the cash register and records the amount of cash and the time. If the count entered does
not match what the computer system has as the current cash level ($ 250) the manager must record an
explanation before proceeding. The server is now ready to begin his or her shift and start waiting on
customers. When taking a customer's order, the server writes the menu items ordered on an order ticket. After
leaving the table, the server then enters the order into the computer system. The kitchen receives the order
from the computer system once it is entered. No food or beverage can be produced until the order is entered
into the computer system. When the order is ready, the kitchen staff marks the order as complete in the
computer system and the server is notified that the order is ready. The server then picks up the food and takes
it out to the customer. Once the diners are finished eating, the server clears the table, prints the check from
the computer system, and brings the check to the table. If a price adjustment is necessary due to an error, the
server must get a manager's approval to override the price in the computer system. Prior to authorizing
an override, the manager visits the table to speak with the customer and ensure the person is satisfied. At the
end of the shift, the cash drawer is reconciled and set to equal the amount needed at the start of the
next shift, $ 250.The manager counts and reconciles the drawer in the presence of another employee. All cash
collected during the shift, less the $250 is removed from the register and taken to the bank for deposit by the
manager. The computer system sales totals for the shift are reconciled with the cash deposit by an accounting
staff member in The Cheesecake Factory headquarters each day. Any discrepancies trigger a phone call from
headquarters and a possible investigation of that restaurant.
Which of the following is not an internal control present in the mini-case description of operations at a
cheesecake factory restaurant?
Only senior level servers can access the register
4. which of the following is NOT an internal control present in the mini-case description of operations at a
cheesecake factory restaurant?
Random register counts throughout the day
5. what law requires public companies, such as the cheesecake factory, to issue an internal control report and
receive an audit of their internal controls annually?
Sarbanes-Oxley Act of 2002
6. which of the following is not an objective of the internal controls implemented at the cheesecake factory?
Reduce company expenses
7. which of the following is the asset that the controls listed in the mini case are primarily designed to protect?
Cash
Quiz #4 Review
1. which of the following statements regarding cash equivalents is INCORRECT?
Because cash equivalents are less liquid than cash, they must be reported separately from the cash
account
2. what is fraud?
(1) fraud in the intentional misrepresentation of facts made for the purpose of persuading another
individual to act in a way that causes injury (2) fraud is untruthful financial reporting (3) fraud is the
misappropriation of assets
All of the above is correct
3. the type of fraud committed by company managers, who make false and misleading entries in the books in
order to improve a company’s financial statements, is called:
Fraudulent financial reporting
4. following info is available:
Cash pledged as collateral $1,500,000
US treasury bill due in one month (purchased 6
months ago)
$1,500,000
US treasury bill due in one year (purchased
yesterday)
$1,000,000
Cash in checking account $300,000
What is the amount of cash & cash equivalents to be reported on the balance sheet?
$1,800,000
(cash pledged as collateral + cash in checking account)
5. outside auditors are responsible for establishing and maintaining
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