Exercise 7-3 The following control procedures are used in Kelton Company for ove

Question

Exercise 7-3

The following control procedures are used in Kelton Company for over-the-counter cash receipts.

(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure

Weakness

Principle Violated

Broadening Your Perspective 13-2

TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)

    Impairment of equity method investment

    Loss from equity method investment

    Amortization of marketable security premiums

    Changes in operating assets and liabilities:

    Accounts receivable

    Other receivables

    Inventories

    Prepaid expenses and other assets

    Accounts payable and accrued liabilities

    Income taxes payable and deferred

    Postretirement health care and life insurance benefits

    Deferred compensation and other liabilities

    Others

  Capital expenditures

  Net purchase of trading securities

  Purchase of available for sale securities

  Sale and maturity of available for sale securities

  Net cash used in investing activities

    Shares repurchased and retired

    Dividends paid in cash

    Net cash used in financing activities

  Income taxes paid

  Interest paid

  Stock dividend issued

Show Solution

Show Solution

Procedure

Weakness

Principle Violated

1. Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy. 2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer. 3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stock room until it is deposited in the bank. 4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total. 5. The company accountant makes the bank deposit and then records the day’s receipts.

Explanation / Answer

Particulars T Industries H Company 2010 517149 5671009 2011 528369 6080788 Calculation (528369-517149)/517149 (6080788-5671009)/5671009 Percentage increse in sales 2.169587488 7.22585699 Particulars T Industries H Company 2010 53063 509799 2011 43938 628962 Calculation (43938-53063)/53063 (628962-509799)/509799 Percentage increse in net income -17.19654 23.3745064 Particulars T Industries H Company 2010 857959 4272732 2011 857856 4412199 Calculation (857856-857959)/857959 (4412199-4272732)/4272732 Percentage increse in total assets -0.01200524 3.26411767 Particulars T Industries H Company 2010 667408 937601 2011 665935 872648 Calculation (665935-667408)/667408 (872648-937601)/937601 Percentage increse in Shareholders Equity -0.22070458 -6.92757367 Particulars T Industries H Company 2010 0.9 2.08 2011 0.76 2.58 Calculation (0.76-0.90)/0.90 (2.58-2.08)/2.08 Percentage increse in Earings per share -15.5555556 24.0384615

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