Risk and Procedures for Control Paper 9

1

Which group has the primary responsibility for the establishment, implementation, and monitoring of adequate controls in the posting of accounts receivable?






2

A retailer of high-priced durable goods operates a catalog-ordering division that accepts customer orders by telephone. The retailer runs frequent price promotions. During these times, the telephone operators enter the promotional prices. The risk of this practice is that






3

ABC is a major retailer with over 52 department stores. The marketing department is responsible for
1. Conducting marketing surveys
2. Recommending locations for new store openings
3. Ordering products and determining retail prices for the products
4. Developing promotion and advertising for each line of products
5. Determining the pricing of special sale items
The marketing department has separate product managers for each product line. Each product manager is given a purchasing budget by the marketing manager. Product managers are not rotated among product lines because of the need to acquire product knowledge and to build relationships with vendors. A subsection of the department does marketing surveys.
In addition to ordering and pricing, the product managers also determine the timing and method of product delivery. Products are delivered to a central distribution center where goods are received, retail prices are marked on the product, and the goods are segregated for distribution to stores. Receiving documents are created by scanning in receipts; the number of items scanned in are reconciled with the price tags generated and attached to products. The average product spends between 12 and 72 hours in the distribution center before being loaded on trucks for delivery to each store. Receipts are recorded at the distribution center, thus the company has not found the need to maintain a receiving function at each store.
Each product manager is evaluated on a combination of sales and gross profit generated from their product line. Many products are seasonal and individual store managers can require that seasonal products be "cleared out" to make space for the next seasonís products.
A control deficiency associated with the given scenario is






4

ABC is a major retailer with over 52 department stores. The marketing department is responsible for
1. Conducting marketing surveys
2. Recommending locations for new store openings
3. Ordering products and determining retail prices for the products
4. Developing promotion and advertising for each line of products
5. Determining the pricing of special sale items
The marketing department has separate product managers for each product line. Each product manager is given a purchasing budget by the marketing manager. Product managers are not rotated among product lines because of the need to acquire product knowledge and to build relationships with vendors. A subsection of the department does marketing surveys.
In addition to ordering and pricing, the product managers also determine the timing and method of product delivery. Products are delivered to a central distribution center where goods are received, retail prices are marked on the product, and the goods are segregated for distribution to stores. Receiving documents are created by scanning in receipts; the number of items scanned in are reconciled with the price tags generated and attached to products. The average product spends between 12 and 72 hours in the distribution center before being loaded on trucks for delivery to each store. Receipts are recorded at the distribution center, thus the company has not found the need to maintain a receiving function at each store.
Each product manager is evaluated on a combination of sales and gross profit generated from their product line. Many products are seasonal and individual store managers can require that seasonal products be "cleared out" to make space for the next seasonís products.
Requests for purchases beyond those initially budgeted by the marketing manager must be approved by the marketing manager. Which of the following statements regarding this control procedure is correct? The procedure
I. Should provide for the most efficient allocation of scarce organizational resources
II. Is a detective control procedure
III. Is not necessary because each product manager is evaluated on profit generated, thus this control is redundant






5

In an automated payroll processing environment, a department manager substituted the time card for a terminated employee with a time card for a fictitious employee. The fictitious employee had the same pay rate and hours worked as the terminated employee. The best control technique to detect this action using employee identification numbers would be a






6

Payroll systems should have elaborate controls to prevent, detect, and correct errors and unauthorized tampering. The best set of controls for a payroll system includes






7

Accounting controls are concerned with the safeguarding of assets and the reliability of financial records. Consequently, these controls are designed to provide reasonable assurance that all of the following take place except






8

The reporting of accounting information plays a central role in the regulation of business operations. The importance of sound internal control practices is underscored by the Foreign Corrupt Practices Act of 1977, which requires publicly owned U.S. corporations to maintain systems of internal control that meet certain minimum standards. Preventive controls are an integral part of virtually all accounting processing systems, and much of the information generated by the accounting system is used for preventive control purposes. Which one of the following is not an essential element of a sound preventive control system?






9

The document that is used to record the actual work performed for a specific product by each factory employee is called a(n)






10

If employee paychecks are distributed by hand to employees, which one of the following departments should be responsible for the safekeeping of unclaimed paychecks?






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