Accountant 492

Topics: Internal control, Computer, Item number Pages: 5 (1210 words) Published: September 15, 2011
Week 3 Homework

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Weaknesses in Jameson Company's Internal control procedures: 
INGREDIENTS INVENTORY 
 1. The raw materials are received by one of the employees of the batching department and it is only at the end of the day that tallies are given to the inventory control department. Reason: There is no control to ensure that the actual raw material signed in is actually received and used. 
 2. The inventory control department uses weekly reports of production and standard formula to calculate ingredient use. Reason: There is no way of ascertaining the actual raw materials used. 
 3. The inventory control department prepares purchase requisitions. Reason: This is not an authorized way of preparing purchase requisitions.   


MAINTENANCE PARTS AND SUPPLIES 

1. The practice of storeroom requisitions is not followed always. Reason: There is no control over material issued. 
 2. The storeroom is not locked when the clerk is out.: Reason: There is no physical control over assets. 
 3. The storeroom is open during the third shift: Reason: The physical control over assets of the company is lost. 
 4. The storeroom clerk prepares purchase requisitions. Reason: He is not the authorized person to make requisitions. 
 5. Physical inventory is taken on a cycle count basis. Reason: This introduces errors in the inventory count. 



Recommended improvements: 

INGREDIENTS INVENTORY 

1. The raw materials are received by one of the employees of the batching department and it is only at the end of the day that tallies are given to the inventory control department. Improvements: The inventory control department should enter the materials received when they are physically received. 
 2. The inventory control department uses weekly reports of production and standard formula to calculate ingredient use. Improvements:  The inventory control department should use the actual use figures of material allotted to production 
 3.The inventory control department prepares purchase requisitions. Improvements. A person appointed by the purchase department and not by the inventory control department should prepare the purchase requisitions. 



MAINTENANCE PARTS AND SUPPLIES 

1. The practice of storeroom requisitions is not followed always Improvements: No parts or supplies should be issued without a stateroom requisition. 
 2. The storeroom is not locked when the clerk is out: Improvements: The storeroom should always be locked whenever the store clerk is out. 
 3. The storeroom is open during the third shift: Improvements: The storeroom should not be open when the storekeeper is not present. Only the storekeeper can issue parts and supplies and he will be held responsible for shortages. 
 4. Purchase requisitions are purchased by the storeroom clerk: Improvements: Purchase requisitions should never be signed by he storeroom clerk; these should be signed by another person designated by the purchase department. This separation of duties is essential. 
 5. Physical inventory is taken on a cycle count basis: Improvements: Physical inventory should be taken as the cycle count basis leads to errors. 

 Someone from the purchase department should prepare purchase requisition.

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|INVENTORY SUBSTANTIVE TEST |HOW GENERALIZED AUDIT SOFTWARE MIGHT BE HELPFUL FOR SUBSTANTIVE | | |TESTS | |1. Observe the physical count, making and recording test counts |1. Determine which items are to be test counted by selecting a | |when applicable. |random sample of a representative number of items from the | | |inventory file as of the date of the physical count. | |2. Discuss the valuation procedures used by the client to |2. Match the item...
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