Ask Question, Ask an Expert


Ask Accounting Basics Expert

You are provided with the following description of the accounting system and internal controls for materials purchases by the Johnson Machinery Company, a medium-sized firm that builds special machinery to order, that is a publicly held company..

Materials purchase requisitions are first approved by the plant foreman, who then sends them to the purchasing department. Purchasing department employees enter the purchase requisition information into the computer, which automatically generates a purchase order in sequential order. The system automatically generates a paper copy of the purchase order, which is sent by purchasing department employees to the vendor. The receiving department electronically accesses a copy of the purchase order, which is printed to serve as a receiving report.

Delivered materials are immediately sent to the storeroom. The completed receiving report, which is a printed copy of the purchase order, is sent to the purchasing department. A copy of the receiving report is sent to the storeroom. Materials are issued to factory employees subsequent to the verbal request by one of the foremen.

When the mailroom clerk receives vendors' invoices, he forwards them to the purchasing department employee who placed the order. The invoice is compared with the electronic copy of the purchase order for price and terms by the employee. The invoice quantity is compared with the receiving department's report. After checking footings, extensions, and discounts on the vendor invoice, the employee indicates approval for payment by initialing the invoice. The invoice is then forwarded to the accounting department (voucher section) where it is coded for account distribution, assigned a voucher number, and entered into the accounting system for recording in the voucher register. The system tracks invoices due by payment date due. The purchase order and receiving report are filed in the purchasing department.

On payment dates, the system automatically generates a request for payment. The system automatically prepares checks and a transaction list for preparation of a cash disbursements journal, updates the accounts payable master file, and indicates the payment date for the voucher register. Prenumbered checks are sent to the cashier, who puts them through the check-signing machine. The checks are then sent to the voucher section that makes sure that the checks were correctly prepared. The checks are placed in envelopes and sent to the mailroom. The vouchers are subsequently filed in numerical order. At the end of each month, a computer listing of voucher and cash disbursement transactions, and an outstanding accounts payable list is prepared.





1. Prepare a flowchart for the acquisition and the payment cycle for Johnson Machinery Company.

2. List the controls in existence for each of the six transaction-related audit objectives for acquisitions.

3. For each control in part 2, list one test of control procedure for verifying its effectiveness.

4. List the most important deficiencies in the acquisition and payment cycle.

5. Identify the most likely error or fraud that could result from each of the deficiencies listed in part 4.

6. Suggest a system alteration for JMC that would correct each of the deficiencies identified in part 4. Be sure to keep cost/benefit in mind.

7. Design an audit program to test internal control. The program should include, but not be limited to, tests of controls from part 3 and procedures to compensate for the deficiencies in part 4.

8. Prepare a separate Internal Control Report over Financial Reporting based upon your evaluation of the identified audit deficiencies.


Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M939617

Have any Question? 

Related Questions in Accounting Basics

Taskquestion 1 - business intelligenceyou are a recent

Task Question 1 - Business Intelligence You are a recent graduate working in a local accounting firm. Your firm provides advice to a large number of clients to assist them with their business. Your managing partner has a ...

Tim and jill taylor are retiring this year tim has worked

Tim and Jill Taylor are retiring this year! Tim has worked for a utility company since his co-op job in college and has participated in all of the company's retirement savings plans. Jill has worked since their kids were ...

Contemporary issues in accounting-topic - critical

Contemporary issues in accounting- Topic - Critical Accounting Theory Objective- Makes a clear distinction between different theories of accounting Critically evaluate contemporary external company reporting practices Le ...

At its inception the lease term of lease g is 65 of the

At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a bargain purchase option. The lessee should record Lease G as a. Neither an asset n ...

Short paperyour customer has asked you to gather details to

Short Paper Your customer has asked you to gather details to meet IT audit requirements. You need to send them a report on IT audit objectives, risk assessment, and what help you may need from them to complete this task. ...

Choose a manufacturing company as a basis for this

Choose a manufacturing company as a basis for this discussion. Select one of the following variances: • direct material price variance, • direct labor price variance, • direct material efficiency variance, • direct labor ...

Assignmentnbsp the eatery is a restaurant in dekalb

Assignment  The Eatery is a restaurant in DeKalb, Illinois. It specializes in deluxe sandwiches in a moderate price range. Michael Raye, the manager of The Eatery, has determined that during the last two years the sales ...

Practice questionsdescribe a situation in which two of the

Practice questions: Describe a situation in which two of the main accounting concepts might be in conflict. Explain what you consider the correct accounting treatment should be.

Topic ethics in auditing practiceyour assignment should

Topic: "Ethics in auditing practice" Your assignment should answer the following questions: 1. Provide a brief overview of the nature of the auditing/ethical issue/s involved with Ethics in auditing practice. 2. How does ...

Nbspcomplete all requirements which are listed

COMPLETE ALL REQUIREMENTS WHICH ARE LISTED BELOW. REQUIREMENT #1: During its first month of operation, the View Corporation, a construction company which specializes in home remodeling,                                    ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate