SOLUTIONS

CHAPTER 1

Solutions to Practice Questions

1.      

Recorded acquisitions are for goods received (occurrence) Acquisitions are recorded (completeness) Acquisitions are recorded accurately (accuracy) Acquisitions are classified correctly (classification)
Control Activities
Vendors are rotated among purchasing agents X
Purchase orders are required for all procurements X X X
Receiving reports are required for all receipts X X X
The numerical sequence of receiving reports are accounted for by accounts payable X
There is a separate warehouse that counts goods obtained from the receiving department X X X
A physical inventory is taken periodically X X X X

2.     Duties should be separated as follows:

     Bookkeeping — Should be performed by accounts payable.

     Access to assets — Should be restricted to authorized personnel (warehouse personnel) and enforced by the use of keys and identification cards that are inspected by security personnel, or by some other means.

     Authorization of transaction — Using the example from this chapter, all departmental supplies requests had to be approved by the departmental manager. In addition, the purchasing department is the only department that should issue purchase orders.

     Independent reconciliation — A physical inventory should be performed with adequate frequency. The physical inventory should be observed by personnel independent of the warehouse department and test counts should ...

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