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The following are partial descriptions of internal control for companies engaged in the manufacturing business: Company 1:
The following are partial descriptions of internal control for companies engaged inthe manufacturing business:Company1: Every day, hundreds of employees clock in using time cards at GenerousMotors Corporation. The timekeepers collect these time cards once a week anddeliver them to the computer department. There the data on these time cards areentered into the computer. The information entered into the computer is used inthe preparation of the labour cost distribution records, the payroll journal,and the payroll cheques. The treasurer, Mrs. Webber, compares the payrolljournal with the payroll cheques, signs the cheques, and returns them to Mr.Strode, the supervisor of the computer department. The payroll cheques aredistributed to the employees by Mr. Strobe.Company2: The smallest branch of Connor Cosmetics Inc. in Medicine Hat employs MaryCooper, the branch manager, and her sales assistant, Jane Hendrix. The branchuses a bank account in Medicine Hat to pay expenses. The account is kept in thename of “Connor Cosmetics Inc.-Special Account.” To pay expenses, cheques mustbe signed by Mary Cooper or by the treasurer of Connor Cosmetics, John Winders.Cooper receives the cancelled cheques and bank statements. She reconciles thebranch account herself and files cancelled cheques and bank statements in herrecords. She also periodically prepares reports of disbursements and sends themto the home office.Requireda. List the weaknesses ininternal control for each of the above.b. For each weakness, statethe type of misstatement that is (are) likely to result. Be specific.c. How would you improveinternal controls for each of the 2 companies?
