Abernethy And Chapman Case
David LaFlamme Kelly Heikens Kelsey Carlson Joel Cramblit
Case 5 - Exercise 1
Abernethy and Chapman
Internal Control Questionnaire - Accounts Receivable
Client: The Lakeside Company
Prepared by: Abernethy and Chapman (Mitchell)
Date: July 6, 2015
Questions
Comments on Current System
Significance
Suggestions
1
Does an independent party on a regular basis reconcile the subsidiary ledger?
Yes, the independent auditors examine it at least once a year.
No control is maintained over Miller’s handling of the subsidiary ledger throughout the year. The possibility that errors will be discovered on a timely basis becomes impossible. Miller has the opportunity for manipulating the records to cover thefts and other defalcations.
A member of the administrative staff should verify that the subsidiary ledger for accounts …show more content…
1-D
Calculated cash discounts should be identical with the amounts by the client company. In most cases, this calculated discount figure will be equal to the difference between the sales invoice total and the cash remittance.
Discounts may be incorrectly recorded to hide cash shortages or as a step in stealing cash funds from the company. Also, the company may be allowing customers to take discounts that have not actually been earned. Allowing these reductions would indicate lack of efficiency in internal control.
1-E
All prices on the invoices should agree with the prices being shown on the approved price list.
All prices detailed on invoices should align with prices on the approved price list. Improper pricing, either intentionally or unintentionally, also leads to incorrect sales and receivables figures on the financial statements. If the invoice price is too high, sales and income are overstated; if too low, the figures will be understated, and company employees may be receiving kickbacks from
Case 5 - Exercise 1
Abernethy and Chapman
Internal Control Questionnaire - Accounts Receivable
Client: The Lakeside Company
Prepared by: Abernethy and Chapman (Mitchell)
Date: July 6, 2015
Questions
Comments on Current System
Significance
Suggestions
1
Does an independent party on a regular basis reconcile the subsidiary ledger?
Yes, the independent auditors examine it at least once a year.
No control is maintained over Miller’s handling of the subsidiary ledger throughout the year. The possibility that errors will be discovered on a timely basis becomes impossible. Miller has the opportunity for manipulating the records to cover thefts and other defalcations.
A member of the administrative staff should verify that the subsidiary ledger for accounts …show more content…
1-D
Calculated cash discounts should be identical with the amounts by the client company. In most cases, this calculated discount figure will be equal to the difference between the sales invoice total and the cash remittance.
Discounts may be incorrectly recorded to hide cash shortages or as a step in stealing cash funds from the company. Also, the company may be allowing customers to take discounts that have not actually been earned. Allowing these reductions would indicate lack of efficiency in internal control.
1-E
All prices on the invoices should agree with the prices being shown on the approved price list.
All prices detailed on invoices should align with prices on the approved price list. Improper pricing, either intentionally or unintentionally, also leads to incorrect sales and receivables figures on the financial statements. If the invoice price is too high, sales and income are overstated; if too low, the figures will be understated, and company employees may be receiving kickbacks from