cisb42_chapter 1 assignment_by jeryll jones jamero

7/23/2019 CISB42_Chapter 1 Assignment_by Jeryll Jones Jamero

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Jeryll Jones B. Jamero BS

Accountancy – IV

Problem 1:a.

i. The management is the one who looks over the assets of

the company, taking into consieration if these assets have

!een taken care of an well"protecte. #oreover, it is also

concerne with the esta!lishment, maintenance, anevaluation of the internal control system.

ii. The audit committee$s main role involves assisting the

!oar of irectors as well as the management. It supports

!oth in accomplishing their %uciary an accounta!ility

roles an responsi!ilities. &urther, it also is responsi!le for

keeping a irect line of communication !etween the !oar

an the e'ternal an internal auitors.iii. The external auditor is taske in the creating of an

opinion whether the %nancial statements are fairly

presente in conformity with an accepte %nancialreporting framework. Also, the e'ternal auitor has the

responsi!ility of communicating any %nings of material

weaknesses foun uring the review.iv. The internal audit department performs !oth

operational an %nancial auits. It investigates an

appraises the e(ectiveness an e)ciency of operations

an internal controls. It also etermines #icro *ynamics$

compliance with esta!lishe policies an proceures an

eliver its %nings an recommenations to management

or the auit committee in a form of report for evaluation

an corrective action. It has also the role of assisting the

e'ternal auitors in reviewing the internal control system.

!. An audit committee is a committee of the !oar of irectors

that focuses on issues relevant to the integrity of the company$s

%nancial reporting. +hile the e'istence of an auit committee

oes not alter the nee for irectors to take responsi!ility for

%nancial reports, auit committees can play an important role in

the %nancial reporting process an in supporting an promoting

auit uality. It reviews an recommens to the Boar the

approval of the #ico *ynamics$ interim %nancial reports an theannual %nancial statements. It stuies the scope an the results

of the inepenent auit an ensures compliance with the

inepenent auitor$s fee !uget. It also ensures that the main

risks associate with the #icro *ynamics$ activities are ienti%e

an manage !y the company itself, nota!ly through the




Accountancy – IV

integrity of its internal control an information management

system.

Problem 2:

a. Objectivity is an un!iase mental attitue that allows internal

auitors to perform engagements in such a manner that they

!elieve in their work prouct an that no uality compromises

are mae. To make un!iase performance an reporting

ecisions, internal auitors must !e a!le to manage threats to

o!-ectivity. This a!ility is also an important signal to governing!oars, shareholers, an e'ternal parties that internal auit

activities can !e relie on to provie assurance a!out control,

compliance, an other relevant matters.!.

i. !-ectivity is not impaired in this situation !ecause the

preparation of policy statements to guie other employees

or other organi/ational !oies of 0eigh Inustries in the

evelopment an implementation of internal controls is a

uty an responsi!ility of the internal auit sta(.

ii. !-ectivity is impaired in this situation !ecause theinternal auitor performe an operational task which is the

regular !ank reconciliations. Although the auitor is not

involve in either the receipt or the is!ursement of cash,

regular !ank reconciliation is not part of his1her -o!.iii. !-ectivity is not impaired !y the review of the !uget for

relevance an reasona!leness if the internal auitor has no

uty for creating or e'ecuting the !uget. The situation will

!e i(erent though when he1she will also perform the

review of variances an e'planations as this will e%nitely

impair his1her o!-ectivity.iv. !-ectivity is impaired in this situation !ecause of his1her

involvement in the esign, installation, an initial operation

of the new computeri/e system which in turn will prouce

low con%ence in auit %nings.v. !-ectivity is materially impaired in this situation

!ecause the internal auitor is performing part of 0eigh

Inustries ay"to"ay operations.




Accountancy – IV

c. Yes. The reporting relationship of the irector of the internal

auit an corporate controller negatively a(ects the o!-ectivity

of the internal auit epartment. Inepenence an o!-ectivity is

clearly impaire in this situation given that the one who is

responsi!le for the review an e'amination of the accounting

system an relate operational transactions is the one whoreports to the one who is the su!-ect of the review an

e'amination.. No. #y evaluation of the situation in 2uestion in ! will not

change if the irector of internal auit reports to the auit

committee of the !oar of irectors.

Problem 3:a. Tere is no ris! from this situation !ecause the treasurer is

simply elegating the task of signing checks to the assistant

treasurer who is not responsi!le for either authori/ing or

recoring transactions.!. Tere is ris! in this situation !ecause of the violation of the

principle of segregation of uties. The warehouse clerk has

custoial responsi!ility as well as authori/ation of the isposal of

amage goos. The clerk might use his1her authori/ation power

to recor the theft of goos as spoilage or amage goos.c. Tere is ris! in this situation !ecause of the violation of the

principle of segregation of uties. The sales manager has the

power of creit authori/ation as well as accounts receiva!le

recor keeping an might approve creit to anyone he1she knows

an write it o(.. Tere is ris! in this situation !ecause of the violation of the

principle of segregation of uties. The time clerk has recor

keeping tasks as well as asset custoy an might neglect the

recor of the termination of any employee an keep for himself

the paychecks.

e. Tere is ris! in this situation !ecause of the violation of theprinciple of segregation of uties. The accounting clerk might

hie errors or conceal !alances that o not eual !ecause of

funs he1she has em!e//le.

Problem ":




Accountancy – IV

a. There is no need #or a separation o# tas!s !ecause there is

no connection !etween the two -o!s.!. There is no need #or a separation o# tas!s !ecause !oth

tasks are not connecte to each other.c. There is no need #or a separation o# tas!s !ecause the

employee oes not have access to the assets.. There is no need #or a separation o# tas!s !ecause !oth

tasks are not relate to each other.e. There is a need #or a separation o# tas!s !ecause the

employee might cover up any cash em!e//le !y erroneously

putting wrong amounts an items the !ank reconciliation.

Problem $

a.i. %utori&ation

-

A formal system of transaction authori/ations allows thecommitment of company resources in accorance with

management goals an o!-ectives. Transactions must

!e e'ecute accoring to the terms of their general or

speci%c authori/ations, !y responsi!le personnel acting

within the scope of their prescri!e authority an

responsi!ility.

- Its o!-ective is to ensure that all transactions are

approve !y responsi!le personnel acting within their

range of knowlege an proper span of control !efore

the transaction is recore. Transactions must !ee'ecute accoring to the terms of their general or

speci%c authori/ations, !y responsi!le personnel acting

within the scope of their prescri!e authority an

responsi!ility.ii. 'omplete and accurate record !eeping

- This is necessary to assure that prompt, timely, an

accurate recoring of transactions or economic events

occurs. The company must make an keep !ooks,

recors, an accounts that, in reasona!le etail,

accurately re3ect the transactions an ispositions of

assets.iii. Pysical controls

- This is necessary to ensure that access to physical

assets an information systems are controlle an

properly restricte to authori/e personnel.

- This relates to safeguaring assets, ocuments, an

recors to prevent their loss, estruction, or alteration




Accountancy – IV

iv. (nternal veri)cation

- This refers to the inepenent review of the accuracy

an propriety of another party$s work, an the testing of

the recore accounta!ility for assets as compare to

e'isting assets at reasona!le time intervals.

!.4. The sale of long"term securities !ase on the presient$s

approval when the !oar of irectors$ approval is reuire

violates authori/ation proceures.5. All i)ence an interest checks are receive !y the treasurer

an forware to the accounting epartment6 no entry is mae

in the cash receipts !ook. It is, therefore, not possi!le to

etermine if all interest an ivien checks have !een receive

an eposite.7. The !alance in the accounts as of the en of the month closely

appro'imate the amounts shown on the !roker$s statements.8. The treasurer has the authority to !uy an sell securities,

receives revenue, an makes -ournal entries relate to securities.9. Access to short"term securities is unrestricte in the accounting

epartment.c.

4. Implement formali/e proceures :in aition to the company$s

!ylaws; reinforcing the policy that only the !oar of irectors can

authori/e long"term security purchases, an sales.5. All checks shoul !e forware to the group that normally opens,

stamps an logs incoming checks, an the checks shoul !e

recore in the cash receipts !ook at the time of receipt. Theinterest an ivien checks :entries; shoul !e reconcile !y

the accounting epartment to the monthly !roker$s statements.

These statements shoul !e kept on %le to assure that all checks

have !een receive, eposite, an accounte for.7. The accounting epartment must unertake the reconciliation of

the i(erences an implement appropriate proceures to assure

that the accounts an the !rokerage statements are reconciles

monthly.8. Strengthen internal control so that the treasurer oes not have

con3icting uties.9. The short"term securities shoul !e place in a restricte facility

such as a !ank safe eposit !o' or a company safe. Access to

short"term securities shoul !e limite to a few responsi!le

personnel an two people shoul !e present each time the

securities are accesse. Aitionally, a log"!ook shoul !e

maintaine to recor any isposition of securities.




Accountancy – IV

Problem *:a. The payroll processing system violates the principle of the

segregation of uties. The same iniviual veri%es the time

cars, inputs payroll information into the master %le, prints

the checks, machine"signs the checks, istri!utes the checks,an prepares the payroll -ournal entry, which may lea to

corruption. There is no authori/ation of employees$ time cars !y a

supervisor or other o!-ective party, such as a timekeeper. The payroll checks are not pre"num!ere nor are they

properly store. As a result, there is no auit trail to verify

check usage. There is no control over the machine"signing of checks<no

control of the signature plate !y a secon party or use of a log

to recor activity. The ata processing epartment appears to have full access

to the payroll %les an checks, which coul lea to sensitive

payroll information !eing leake.!. The personnel epartment etermines the wage rate an

initiates the setup of payroll recors, which is a goo e'ampleof segregation of uties.

A !ackup of the master %le is mae after each weekly

processing of the payroll.

cisb42_chapter 1 assignment_by jeryll jones jamero

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