FOR NEEL ONLY

PRINTED BY: genevieve.rodriguez@Verizon.net Printing is for personal. private use only. No part of this book may be reproduced or transmitted without publisher’s prior pen:msion. ‘-JOIa:Drswill be prosecuted.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

Survey of Accounting. Third Edition

Internal Controls. Acrounting for Cash. and Ethics 149

Required
Use the fraud triangle as a basis to comment on Bill Petry’s gambling activities.

Exercise 4·16 ConjidentUUitj’ and tire llIlJIitor
“”est Aston discovered a significant fraud in the accounting records of a high profile client. The
story bas been broadcast on national air’ol-ays. Aston was unable to resolve his remaining con-
cerns with the company’s management team and ultimately resigned from the audit engagement.
Aston knows that he will he asked by several interested patties, including his friends and rela-
tives, the successor auditor, and prosecuting auorneys in a court of law to tell what he knows, He
has asked you for advice,

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

Requinld
Write a memo that explains Aston’s disclosure responsibilities to each of the interested parties.

Exercise 4-17 A.uditor respouibiJitiell
You have probably heard it is unwise to bite the hand that feeds you. Independent auditors are
cbosen by, paid by, and can he fired by the companies they audit. \\-‘hat keeps the auditor inde-
pendent? In other words, what stops an auditor from blindly following the orders of a client?

Required
Write a memo that explains the reporting responsibilities of an independent auditor.

PROSLEMS
Allapplic:llble Problems.re available with McGraw·Hilra
CoRReCf AccounDl/fI.

Problem 4-18 Using UrterIUlI contro! to restrict illeguJ or IUll!thica/ belull’wr
Required
For each of the following fraudulent acts, describe one or more internal control procedures that
could have prevented (or helped prevent) the problems.

a. Everyone in the office has noticed what a dedicated employee Jennifer Reidel is. She never
misses work, not ev-en for a vacation, Reidel is in charge of the petty cash fund. She transfers
funds from the company’s hank aceoum to the petty cash account on an as-needed basis.
During a surprise audit, the petty cash fund was found to contain fictitious receipts. Over a
three-year period. Reidel had wed more than $4.000 of petty cash to pay for personal expenses.

b. Bill Bruton was hired as the vice president of the manufacturing division of a corporation.
His impressive resume listed a master’s degree in business administration from a large state
university and numerous colleglate awards and activities, when in fact Bruton had only a
high school diploma. In a short time, the company was in poor- financial condition because
of his inadequate knowledge and bad decisions.

c. Havolene Manufacturing has good internal control over its manufacturing materials lnven-
tory. However, office supplies are kept on open shelves in the employee break room. The of-
fice supervisor has noticed that he is having to order paper, tape, staplers, and pens with
increasing frequency.

Problem 4-19 PreptITing a bunk reoonciJiRtwn
Bob Carson owns a card shop, Card Talk. The following cash information is available for the
month of August, 2012.

As of August 31, the bank statement shows a balance of $17,000. The August 31 unadjusted
balance in the Cash account of Card Talk is SI6,000. A review of the bank statement revealed
the following information:

l. A deposit of S2,260 011 August 31, 2012, does not appear on tbe August bank statement.
2. It was discovered that a check 10 pay fot baseball cards was correctly written and paid by the

bank for $4,040 but was recorded on the books as S4,400.

L04

L04

L01
• I!!S ilj11..:L,-

L02

CH£CKflGU E
True Cash Balance, August 31.
2012: S16,250

PRINTED BY: genevieve.rociriguez@Verizon.net. Printing is for personal. private use only. No part of this book may be reproduced or tnmsmined without publisher’s prior permission. Violators will be prosecuted

152 ACC201

L02


CHECK fiGURE
Unadjust8dCashBalance,
May 31. 2012:$5.565

L02

~I

3. ~lleo checks written during the month were compared with those paid by tile bank, three
checks amounting to S3,000 were found to be outstanding.

4. A debit memo forSlOO was included in tile bank statement for tile purchase of a new supply
of checks,

Reqaired
Prepare a bank reconciliation at the end of August snowing tile true cash balance,

Problem 4-20 MuJUtg iIIformatWn in a bank recolII:ilitnion
The following data apply to Superior Auto Supply Inc. for May 2012.

1. Balanee per tile bank on May)1. S&,OOO.
2. Deposits in transit not recorded by the bank, S975.
3. Bank error; check written by Allen Auto Supply was charged to Superior Auto Supply’s

account, S6SO.
4. The following checks wtitlen and recorded by Superior Auto Supply were not included in tile

bank statemenc

3013
3054
:Jl56

S 385
735

1.!100

5. Note collected by tile bank. S500.
6. Service charge for collection of note, 510.
7. The bookkeeper recorded a check written for S 188 to pay for tile May utilities expense as

5888 in the cash disbursemetlts journal.
8. Bank service charge in addition to the note collection fee, 525.
9. Customer checks returned by the bank as :-.rsF, SI2S.

Reqaired
Determine the amount of tile unadjusted cash balance per Superior Auto Supply’s books

Problem 4-21 Adjustmelft. to the cash r,,;colllft brued on the bank reconciliation
Required
Determine whether the following items included in Yang Company’s bank reconciliation will
require adjustments or corrections on Yang’s books.

II. An S877 deposit was recorded by tile bank as S778.
b. Four checks totaling S450 written during tile month of January were not included with the

January bank statement.
c. A S54 check written to for office supplies was recorded in the general journal

as $45.
d. The bank statement indicated that tile bank bad collected a S330 note for Yang.
eo Yang recorded S500 of receipts on January 31, which were deposited in tile night depository

of the bank. These deposits were not included in tile bank statement.
L Service charges of 522 for tile month of January were listed on tile bank statement.
g. The bank charged a S297 check drawn on Cave Restaurant to Yang’s account. The check was

included in Yang’s bank statement.
h. A check of S31 was returned by the bank because of insufficient funds and was noted on tile

bank statement. Yang received the check from a customer and thought that it was good when
it was deposited into the account.

Still stressed from student homework?
Get quality assistance from academic writers!

Order your essay today and save 25% with the discount code LAVENDER