Question 1 Ashland Company\'s raw materials are kept in a locked stockroom. The

Question

Question 1

Ashland Company's raw materials are kept in a locked stockroom. The stockroom employees are well trained and bonded. Raw materials are removed upon oral authorization. Which of the following identifies a control weakness.

Bonding is a waste of money.

Too many people have access.

Oral authorization is undocumented.

Only one supervisor.

Question 2

All of the following would address internal control weaknesses in Ashland's store room except:

Raw materials should be removed from the storeroom only upon written authorization from an authorized production foreman. The authorization forms should be prenumbered and accounted for, list quantities and job or production number, and be signed and dated.

The authorization forms should be prenumbered.

The forms should be accounted for, list quantities and job or production number, and be signed and dated.

The bonding should be cancelled as it is a waste of money.

Question 3

Ashland's practice of monthly physical inventory counts does not compensate for the lack of a:

perpetual inventory system

periodic inventory system

Supervisor

Clerk

Bonding is a waste of money.

Too many people have access.

Oral authorization is undocumented.

Only one supervisor.

Explanation / Answer

question 1:

oral authorisation is undocumented

It is a control weakness.

question 2:

D.The bonding should be cancelled as it is a waste of money.

(this point does not address any internal control weakness, it only points out to leaking of money).

question 3:

aPerpetual inventory system.

(a perpetual inventory system will always be handy in knowing the number of units in hand, monthly inventory counts do not compensate for it).

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