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BYP 7-4 REAL-WORLD FOCUS
(a) The system of internal control should be evaluated by: (1) responsible
(b) Some red flags which may indicate existence of white-collar crime
include:
Employee living beyond his/her means
(c) Internal audits’ role at Boston College includes reviews of the adequacy
of the system of internal control in all major aspects of University
store data off-site.
BYP 7-5 DECISION MAKING ACROSS THE ORGANIZATION
basement office.
(b) The improvements should include the following:
committee member.
(3) Following the count, the financial secretary should prepare a deposit
(c) The policies that should be changed are:
(1) Members should make checks payable to the church.
BYP 7-6 COMMUNICATION ACTIVITY
Mr. Danny Peak
Pritchard Company
Main Street, USA
Dear Mr. Peak:
improvements are listed below.
Weaknesses
Suggested Improvement
1.
A list of checks received is not
prepared by the person who opens
the mail.
This list should be prepared so that it
can later be compared with the daily
cash summary. While this procedure
does not assure that all checks will
be listed, it does allow the company
to verify that all checks on the list did
get deposited.
2.
Mail is opened by only one person.
When this occurs, there is no assurance
that all incoming checks are forwarded
to the cashier’s department.
3.
The cashier is allowed to open
the mail.
Under this arrangement, it is possible
for the cashier to open the mail, pre-
pare the cash summary and make the
bank deposit. This involves no segrega-
tion of duties as the cashier controls
the cash from the time it is received
until it is deposited in the bank.
4.
The accounts receivable clerk is
allowed to open the mail.
Again, there is poor segregation of
duties. In this case, the clerk could
writeoff a customer’s account as un-
collectible and then misappropriate the
collection when it’s received.
BYP 7-6 (Continued)
Weaknesses
Suggested Improvement
5.
Mail receipts are deposited weekly.
This makes the receipts vulnerable
to robbery and to misappropriation.
The receipts should be deposited
intact daily.
Yours sincerely,
Eaton, Quayle, and Hale
Certified Public Accountants
BYP 7-7 ETHICS CASE
(a) You, as assistant controller, may suffer some negative effects from Lisa
Infante, the financial vice-president, if you don’t follow her instructions.
Maybe the insurance company will react the way Lisa suggests, but
probably not.
If you comply and falsify the June 30 cash balance by holding the cash
(b) Holding the cash receipts book open in order to overstate the cash
(c) (1) You can follow the vice-president’s instructions and misstate the cash
BYP 7-8 ALL ABOUT YOU
Answers are provided to students on the government website as they
complete the ID Theft Faceoff quiz.
BYP 7-9 FASB CODIFICATION ACTIVITY
(a) Consistent with common usage, cash includes not only currency on
hand but demand deposits with banks or other financial institutions.
Cash also includes other kinds of accounts that have the general
(b) Cash equivalents are short-term, highly liquid investments that have
both of the following characteristics:
a. Readily convertible to known amounts of cash
b. So near their maturity that they present insignificant risk of changes
in value because of changes in interest rates.
Generally, only investments with original maturities of three months or
less qualify under that definition. Original maturity means original maturity
BYP 7-9 (Continued)
(c) Cash and cash items. Separate disclosure shall be made of the cash and
cash items which are restricted as to withdrawal or usage. The provi-
sions of any restrictions shall be described in a note to the financial
IFRS EXERCISES
IFRS7-1
Companies listed on U.S. stock exchanges must comply with the Sarbanes-
Oxley Act. This compliance gives investors greater assurance that these
In order to comply with SOX, a company must document its internal control
procedures and have an auditor attest to their effectiveness. Doing so
IFRS7-2
IFRS7-3 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) Zetar’s Audit Committee reviews management’s reports on internal
control.
(b) The key control procedures include
1. A comprehensive system of financial budgeting, forecasting and
internal audit department.
section of its consolidated balance sheet.
