Question Details

Accounting Homework Help

Internal control: Regent Company encountered the following situations:

a.       The person who opens the mail for Regent, Bill Stevens, stole a check from a customer and cashed it. The cover-up theft, he debited sales returns and allowances and credited Accounts Receivable in the general ledger. He also posted the amount to the customer’s account in the Accounts Receivable subsidiary ledger.

b.       The purchasing agent, Susan Martin, used a company purchase order to order building materials from builders marked. Later, she telephoned builders marked and changed the delivery address to her home address. She told builders marked to charge the materials to the company. At month end, she approved the invoice from builders marked for payment.

c.       Nashville Supply Company sent to invoices for the same order: the first on June 10 and the second on July 20. The accountant authorized payment for both invoices and both were paid.

d.       On January 1, Jack Monte, a junior accountant for Regent, was given the responsibility of recording all general journal entries. At the end of the year, the auditors discovered that Monty had made 150 serious errors in recording transactions. The chief accountant was unaware that Monty had been making mistakes.

Required

For each situation, describe any violation of good internal control procedures and identify the steps that you would take to prevent each situation.