ANSWER TO ADDITIONAL CASE EXERCISE FOR EXAM

(CASE 1, SMITH’S MARKET, P.241-242)

Expenditure Cycle Procedures

Ware house Accounting Clerk Treasury Clerk

Observe Vendor A
inventory
On Hand Stock Purchase
Records Summary
Invoice Journal
Voucher
Review Stock
Prepare PO Review General
and Update Ledger
3
1 File Accounts

PO Invoice
Packing Account
Slip Journal
Summary
4 Voucher
Vendor

Inspect and
2 Update Stock Pay Vendor and
Journal
Records Record in Accounts
Voucher A
Invoice
Packing Purchases
Slip Summary Check Check
Register
Smith’s Market Exp Cycle FC Vendor
A
 ANSWER TO ADDITIONAL CASE EXERCISE FOR EXAM
(CASE 1, SMITH’S MARKET, P.241-242)
Expenditure Cycle Procedures

Internal Control Weaknesses

1) Warehouse clerk has transaction authorization and purchasing responsibility.

2) Warehouse clerk has asset custody and recordkeeping responsibility. Blind PO is not used to

verify received inventory.

3) Accounting clerk approves invoice for payment without the benefit of a receiving report or a

purchase order. No three way match control.

4) Accounting clerk has account payable and cash disbursement responsibility.

 ANSWER TO ADDITIONAL CASE EXERCISE FOR EXAM
(CASE 1, SMITH’S MARKET, P.241-242)
Expenditure Cycle Procedures

IT Controls