Assignment 3 Eye openers 1. (a) Why did Congress pass the Sarbanes-Oxley Act of 2002? (b) What is the purpose of the Sarbanes-Oxley Act of 2002? 2. Define internal control. 3. (a) Name and describe the five elements of internal control. (b) Is any one element of internal control more important than another? 4. How does a policy of rotating clerical employees from job to job aid in strengthening the control procedures within the control environment? Explain. 5. Why should the responsibility for a sequence of related operations be divided among different persons? Explain. 6. Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records? Explain. 7. In an attempt to improve operating efficiency, one employee was made responsible for all purchasing, receiving, and storing of supplies. Is this organizational change wise from an internal control standpoint? Explain. 8. The ticket seller at a movie theater doubles as a ticket taker for a few minutes each day while the ticket taker is on a break. Which control procedure of a business’s system of internal control is violated in this situation? 9. Why should the responsibility for maintaining the accounting records be separated from the responsibility for operations? Explain. 10. Assume that Yvonne Dauphin, accounts payable clerk for Bedell Inc., stole $73,250 by paying fictitious invoices for goods that were never received. The clerk set up accounts in the names of the fictitious companies and cashed the checks at a local bank. Describe a control procedure that would have prevented or detected the fraud. 11. Before a voucher for the purchase of merchandise is approved for payment, supporting documents should be compared to verify the accuracy of the liability. Give an example of supporting documents for the purchase of merchandise. 12. The accounting clerk pays all obligations by pre-numbered checks. What are the strengths and weaknesses in the…
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