SM-06-new CHAPTER 6

8/10/2019 SM-06-new CHAPTER 6

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CHAPTER 6

THE EXPENDITURE CYCLE PART II:

PAYROLL PROCESSING AND

FIXED ASSETS PROCEDURES


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7. he payroll clerk reconciles the in"ormation recei&ed "rom personnel and production!

calculates the payroll and distributes the paychecks. urther! the payroll clerk sends

summary in"ormation to the accounts payable clerk.

0. a. time cards! job tickets! and disbursement &ouchers.

b. journal in"ormation (hich comes "rom the labor distribution summary and the

payroll register.

c. subsidiary ledger accounts *employee records and e'pense accounts+.

d. general ledger accounts *payroll control! cash! and payroll clearing+.

. /iometric time clocks &eri"y employees3 identities by using "ingerprint or hand,&ein

scan technology. o protect employee pri&acy! these de&ices use a mathematical

algorithm "or &eri"ication rather than storing actual "ingerprints in a database.

14. Pro'imity cards are similar to s(ipe cards but don3t re5uire the user to slide the card

through a reader. Instead! the employee places the card in "ront o" the reader to

record attendance time. he ad&antage is that these cards can be read through

(allets! purses! and card holders..

11. 1. Process the ac5uisition o" "i'ed assets as needed and in accordance (ith

"ormal management appro&al and procedures

2. aintain ade5uate accounting records o" asset ac5uisition! cost description!

and physical location in the organi#ation

$. aintain accurate depreciation records "or depreciable assets in accordance

(ith acceptable methods


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). Pro&ide management (ith in"ormation to help them plan "uture "i'ed asset

in&estments and

. Properly record the retirement and disposal o" "i'ed assets.

12. he "i'ed asset system processes nonroutine transactions "or a (ider group o" users

in the organi#ation than the e'penditure cycle. urther! the e'penditure cycle

processes routine ac5uisitions o" ra( materials in&entories "or the production

"unction and "inished goods in&entories "or the sales "unction. he e'penditure cycle

transactions are o"tentimes automatically appro&ed by the system! (hile "i'ed asset

transaction appro&als typically demand indi&idual attention due to the uni5ueness o"

the transactions. %dditionally! "i'ed asset systems must include cost allocation

procedures in order to account "or the apportioned ac5uisition cost and depreciation

o" the "i'ed asset. his is not re5uired as part o" the pre&iously discussed

purchasing system! (hich handles in&entory ac5uisitions that represent current,

period e'penses only.

1$. %sset ac5uisition! asset maintenance! and asset disposal.

1). he typical in"ormation "ound on a depreciation schedule is8 type o" asset!

description! month! current depreciation amount! accumulated depreciation amount!

book &alue! and asset location. %lso! a group code may be assigned. he physical

location o" the asset is recorded! and the &eri"ication that this asset e'ists should be

per"ormed by physically obser&ing the asset. he date and amount o" the purchase

o" the asset can be &eri"ied by locating the original purchase order and in&oice

amount "or the asset.


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1. /ecause the "i'ed asset department authori#es the remo&al o" the asset "rom the

general ledger! they must kno( (hen to record the authori#ation. urther! i"

impro&ements or asset disposals are made and the "i'ed asset department is

una(are! then the depreciation amounts calculated and reported in the "inancial

statements (ill be incorrect.

16. he auditor should re&ie( the authori#ation control procedures to determine the

reasonableness o" authori#ations used "or ac5uisition o" "i'ed assets. he auditors

should also e'amine the super&ision controls o&er the physical guarding o" the

assets. 9astly! the auditors should periodically &eri"y the location! condition! and "air

&alue o" the organi#ation3s "i'ed assets against the "i'ed asset records in the

subsidiary ledgers. %lso! the depreciation schedules should periodically be analy#ed

to determine the accuracy and completeness.

17. he "i'ed asset department pro&ides record keeping "or "i'ed asset in&entory.

10. he "i'ed asset depreciation schedule sho(s (hen and ho( much depreciation to

record. It also sho(s (hen to stop taking depreciation on "ully depreciated assets.

his in"ormation in a management report is also use"ul "or planning asset retirement

and replacement.

1. When an asset is taken out o" ser&ice! the responsiblemanager issues a re5uest to

dispose o" it. 9ike any other transaction! the disposal o" an asset re5uires proper

appro&al that (ill be determined by its nature and materiality. In some cases multiple

le&els o" management may be in&ol&ed! in other situations the manager in charge o"

the asset may ha&e the authority to dispose o" it.


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24. :nlike production assets! "i'ed asset in&entory is distributed (idely across the

organi#ation. Indi&idual items such as automobiles! computers! and o""ice "urniture

are in the custody o" the end,users.

DISCUSSION QUESTIONS


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1. he job ticket is used to allocate each labor hour o" (ork to speci"ic WIP accounts.

hese job tickets are &ery important "or cost accounting. he job tickets are

completed by production (orkers as they capture the total amount o" time that they

spend on each production job. :pon completion! they route these to the cost

accountants (ho use them to post the labor costs to speci"ic WIP accounts such as

direct labor! indirect labor and o&erhead. he cost accountant prepares a labor

distribution summary (hich contains the in"ormation "or the general ledger clerk to

make the necessary entries to the general ledger accounts.

2. Payroll costs such as (ages to (orkers accrue each minute! hour or day that they

(ork. ;o(e&er! these costs are not recorded as a liability during the time bet(een

(hen the (orkers earn their (ages and (hen they are paid. hese time lags

typically a&erage "rom hal" a (eek to a (eek. his time lag is o" no concern until the

"irm is closing its books or preparing interim "inancial statements. %t these points!

ho(e&er! estimates or accruals o" the amounts o(ed should be made and the books

should be adjusted.

$. In a mobile and-or distributed (ork"orce en&ironment in (hich employees directly

enter time and attendance data into the system! the organi#ation is at risk "rom data

entry errors and payroll "raud. Input controls reduce these risks. or e'ample! limit

tests are used to detect e'cessi&e hours reported per period. %lso! check digits

detect transcription errors in employee identi"ication numbers. inally! the use o"

biometric scanners! s(ipe cards! and PI


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). he primary ad&antage o" payroll outsourcing is cost sa&ings. /y trans"erring this

"unction to a third party! the client organi#ation a&oids the salaries and bene"it costs

o" running an in,house payroll department. %lso! the cost o" continuing education "or

payroll sta"" is a "inancial burden. %n in,house payroll department needs to be up to

date on an e&er,changing array o" legal and technical matters. =uch training is

disrupti&e! costly! and can be a&oided by outsourcing the payroll "unction.

. >ne e'ample is the reduction in the time it takes to record the receipt o" in&entory

into the in&entory records. urther! the automated system (ill be less likely to pay an

in&oice early! (hile at the same time not missing the discount period. hus! cash

management is impro&ed.

6. 9a( "irms re5uire their employees to log the amount o" time spent on each client "or

billing purposes. %ccounting "irms also re5uire that their employees keep job tickets

"or the time they spend on each client. Car repair shops are another e'ample. he

mechanic must keep track o" ho( much time he-she spends (orking on each

automobile.

7. he risks associated (ith outsourcing are nontri&ial. >ne is that an outside

organi#ation (ill ha&e access to e'tremely con"idential employee data and to the

client "irm3s "inancial resources. %nother risk is that the ser&ice pro&ider (ill ha&e

poor internal controls and-or act incompetently in a (ay that causes material errors

or "raud. % client organi#ation may outsource any "unction it chooses! but it cannot

outsource its responsibility "or implementing ade5uate internal controls.


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0. =ince the asset remains on the books! depreciation on it (ill continue to be

calculated. i'ed assets (ill be o&erstated! the depreciation amount charged in each

period (ill be o&erstated! and e5uity (ill be misstated. urther! i" insurance is being

paid on assets no longer o(ned! an unnecessary e'pense (ill be incurred! thus

lo(ering net income and retained earnings.

. %:;>?I@%I>< C>9=./ecause "i'ed assets are re5uested and employed

by end,users asset ac5uisitions should be "ormal and e'plicitly authori#ed. Aach

material transaction should be initiated by a (ritten re5uest "rom the user or

department. In the case o" high,&alue items! there should be an independent

appro&al process that e&aluates the merits o" the re5uest on a cost,bene"it basis.

SUPERVISION CONTROLS.

/ecause capital assets are (idely distributed around the organi#ation! they are more

susceptible to the"t and misappropriation than in&entories that are secured in a

(arehouse. here"ore! management super&ision is an important element in the

physical security o" "i'ed assets. =uper&isors must ensure that "i'ed assets are

being used in accordance (ith the organi#ation3s policies and business practices.

INDEPENDENT VERIFICATION CONTROLS.

1. Periodically! the internal auditor should re&ie( the asset ac5uisition

and appro&al procedures to determine the reasonableness o" key "actors

including8 the use"ul li"e o" the asset! the original "inancial cost! proposed

cost sa&ings as a result o" ac5uiring the asset! the discount rate used! and

the capital budgeting method used in justi"ying decisions to buy or dispose

o" assets.


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2. he internal auditor should &eri"y the location! condition! and "air &alue

o" the organi#ation3s "i'ed assets against the "i'ed asset records in the

subsidiary ledger.

$. he automatic depreciation charges calculated by the "i'ed asset

system should be re&ie(ed and &eri"ied "or accuracy and completeness.

=ystem errors that miscalculate depreciation can result in the material

misstatement o" operating e'penses! reported earnings! and asset &alues.

14. he responsible super&isors must authori#e the disposal o" the computer.

11. Per"orm an annual physical in&entory o" "i'ed assets and adjust the records to re"lect

assets no longer on hand. Prepare reports about the disposal o" assets.

12. Prepare reports about the trans"er o" "i'ed assets. Per"orm an annual physical

in&entory and note the location o" assets. /udget and then hold each department

accountable "or depreciation e'pense "or assets located in each department.

1$. %uthori#e "i'ed asset ac5uisitions part o" the authori#ation is sho(ing that a need

"or the asset e'ists.

1). >n the "inancial statements! assets (ill be o&erstated and depreciation e'pense

could be o&erstated. %ssets on property ta' returns (ill be o&erstated and too much

ta' (ill be paid. Insurance premiums (ill be paid on none'istent assets.

MULTIPLE CHOICE

1. /

2. %


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$. C

). C

. C

6. C

7. /

0. %

. C

14. B

11. %

PROBLEMS

1. a. %n employee action report "rom the personnel department should list

all current employees. ime cards "or terminated or non,e'istent

employees should be identi"ied (hen reconciled (ith the personnel report.

b. %n independent paymaster should distribute the paychecks to the

employees. I" an employee is not present to recei&e the paycheck! it (ill be

returned to the payroll department.

2. a. he payroll department has no independent in"ormation as to changes

in an employee3s status. or e'ample! the "oreman may continue to submit

time cards "or terminated employees. =ince the "oreman also distributes

paychecks! he could steal and "orge the uncollected checks.

b. 1. %n employee action report "rom the personnel department

should list all current employees. ime cards "or terminated or non,e'istent


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employees should be identi"ied (hen reconciled (ith the personnel report.

2. %n independent paymaster should distribute the paychecks to the

employees. I" an employee is not present to recei&e the paycheck! it (ill be

returned to the payroll department.

$. Risks:

oremen ha&e too much control o&er the human resources they are responsible

"or recruiting! hiring! and "iring.

he high degree o" casual labor creates an en&ironment that lends itsel" to

abuse.

;igh employee turno&er rate makes identi"ying absent or none'istent employees

di""icult.

Clock machines are unsuper&ised and located in remote areas.

oremen submit personnel action "orms.

oremen distribute the paychecks to the employees! checks (ritten "or

none'istent employees can be kept and cashed by the "oremen.

Co!"o#s:

%uthori#ation. % separated personnel "unction should be established to account

"or employees and to authori#e their payment

=egregation o" Buties. he "oremen should not distribute the paychecks to

employees. his should be the task o" a paymaster.

=uper&ision. he clocking in and out process should be super&ised.

). he checks should be processed through accounts payable and the cash


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disbursement departments. he payroll personnel should not ha&e access to a bank

account (ith "unds. he checks should be prepared! and the money should be

trans"erred into the payroll account by the cash disbursements department. he

payroll department should use personnel action "orms *ne( employees and

terminated employees+ to &alidate employees be"ore they are issued a check.

. he data contained in a human resource management database is e'tremely

sensiti&e. Payroll employees should be able to &eri"y that an employee has the

status o" an acti&e employee! but should not be able to change this status. he

personnel employees! on the other hand! should be able to acti&ate ne( employees

and change the status o" an employee "rom acti&e to terminated. he personnel

employees should not be able to submit time cards "or employees. his separation

o" tasks pre&ents either the payroll employee or the personnel employees "rom

processing paychecks "or none'istent or terminated employees. he payroll

employees should only be able to retrie&e in"ormation (hich is necessary "or payroll.

he human resource database (ill most likely contain other in"ormation (hich the

payroll employees ha&e no business &ie(ing! such as per"ormance e&aluation data!

health records! pension plan balances! injury claims! etc. hus! the central location

o" data needs good controls to make sure that this sensiti&e data cannot be &ie(ed

or tampered (ith. Per"ormance e&aluation data is &ery sensiti&e and pass(ords

should be necessary to access this in"ormation. Payroll rate data is also &ery

sensiti&e and should not be able to be tampered (ith.

6. Risks:


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=uper&isor submits the personnel action "orm. his allo(s him-her to create

none'istent employees.

=uper&isor distributes the paychecks to the employees. Checks (ritten "or

none'istent employees can be kept and cashed by the super&isor.

he appearance o" control pro&ided by accounts payable is decei&ing. he

re&ie( and reconciliation o" the payroll register is based on the presumption that the

personnel action "orm and time cards are legitimate and accurate. =ince they are

both prepared by the super&isor! their integrity is brought into 5uestion.

Co!"o#s:

%uthori#ation8 % separated personnel "unction should be established to prepare

personnel action "orms and manage the human resource.

=egregation o" Buties. he super&isor should not distribute the paychecks to

employees. his should task should be per"ormed by an independent paymaster.

7. T"$s$%!io $&!'o"i($!io

Payroll clerk prepares paychecks (ithout authori#ation "rom a personnel action

"orm.

Cash disbursements department prepares &endor payments based solely on the

In&oice.


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Cash disbursements department maintains the %P ledger and appro&es and

(rites checks.

Payroll checks and &endor check are paid through the general cash account. %n

imprest account should be used to clear the payroll checks.

he super&isor should not distribute the paychecks to employees. his should

task should be per"ormed by an independent paymaster.

%ccounting records


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% "i'ed asset "unction should be implemented to account "or ac5uisition! use! and

disposal o" the assets.

. Risks:

:sers ha&e custody o" the assets and maintain usage records. ey in"ormation

about asset &alue is based on in"ormation pro&ide by the user.

he assets in&ol&ed are particularly subject to misappropriation.

:ser can o&erstate mileage to accelerate the depreciation on a &ehicle to reduce

the book &alue o" the asset.

=uper&isor has discretion to dispose o" the asset as he-she sees "it.

%n o&er,depreciated asset can be sold at a "raction o" its real &alue to the

employee.

Co!"o#s:

Periodic audits o" the assets to &eri"y their mileage and condition.

ormal procedures "or disposal o" assets by an independent group.

Pri&ate sale o" used &ehicles to employees should be on an open,bid basis.

14. ?isks8

:ser prepares purchase order "or assets (ithout independent appro&al.

:ser recei&es and &alidates the in&oice.


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%ccounts payable is not in&ol&ed in the process.

:ser has custody o" the asset and maintains the "i'ed asset ledger.

Co!"o#s:

Implement "ormal procedure "or appro&ing user re5uests "or assets.

he in&oice! recei&ing report! and appro&ed purchase order should be re&ie(ed

by accounts payable! (hich appro&es payment by cash disbursements.

% "i'ed asset "unction should be implemented to account "or ac5uisition! use! and

disposal o" the assets.

11. a. he source documents represent (ells (hich are being drilled. A5uipment

(hich is used may be rented! in (hich case the in&oice "or rental (ould be

the source document. Items purchased (ill probably be deli&ered to the

drilling site! and the source document (ould be a recei&ing report. any

times the e5uipment used to drill the (ell is o(ned! and the source

document "or applying the cost o" the e5uipment to drill the (ell (ould be

the depreciation schedule. Amployee time reports (ould be the source

document "or labor distribution reports! (hich (ould also be used by the

"i'ed asset accounting department. %lso "ood and lodging "or the

employees in the case o" an o"",shore site (ould be included in "i'ed asset

accounting! and the source documents (ould be in&oices "or "ood!

electricity! etc.

b. he costs (ould be allocated by the "i'ed asset accountants based upon

the method o" accounting by the "irm. any "irms (ould include the cost o"


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both (ells together *treated as an asset impro&ement+ and deplete these

costs o&er the estimated reco&erable reser&es *(hich (ould probably be

adjusted up(ards due to the impro&ed reco&ery method+ to be e'tracted by

both (ells.

c. he "i'ed asset accountant must constantly re&ise the depletion rate

being used to allocate the drilling and completion costs. he standard

calculation is8

Total Drilling and Completion Costs

Estimated Equivalent Units of Reserves

In the abo&e e5uation! the denominator may change periodically! as the production

engineers re&ise their estimates about the reco&erable reser&es. he numerator may

also change i" impro&ements are made "or better reco&ery. he "i'ed asset

accountant must be ad&ised o" these changes. igure 6,1$ does not ha&e to be

changed the user department! production! should complete changes in estimate

"orms. In&oices and labor distribution "orms "or impro&ements to the (ell (ould be

distributed the %%s! and they should then update their depletion calculations.

d. he auditors should trace the total (ell costs capitali#ed to each

indi&idual (ell or reser&oir. he accuracy and appropriateness o" the

recording o" these transactions should be e'amined. inally! the

accountant should &isit the (ell site and &eri"y that reser&es are being

e'tracted.

12. 1. Internal Control Weaknesses


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ransaction authori#ation8 prepare personnel action "orm. Paymaster should be

used to distribute paychecks.

Independent &eri"ication8 :se paymaster to distribute the paychecks.

%ccounting records8 Astablish an imprest count in the bank.

1$. a. %ssets are items (hich ha&e probable "uture economic bene"it. he patent to

produce this radar detector e'clusi&ely "or ) years should produce economic

bene"its "or this "irm in the "uture. his asset should be capitali#ed and

amorti#ed o&er the period in (hich the probable economic bene"its are e'pected

to be recei&ed. hus! this asset should be amorti#ed and is a responsibility o"

the "i'ed asset accounting department.

b. he source document "or capitali#ing the patent (ould be the legal agreement o"

rights and the in&oice "or the G0. he costs may be amorti#ed using &arious

methods. =traight,line depreciation is &ery common and i" it used! the

amorti#ation schedule (ould be the source document. =ome "irms may try to

project sales and use a per unit amorti#ation schedule. I" this approach is used!

the project sales "igures and the actual sales "igures (ould be needed to

support the amorti#ation schedule.

c. he "i'ed asset accounting department needs to be noti"ied to change the li"e o"

the asset! either in years or in total sales units. he amorti#ation schedule (ould

ha&e to be changed to re"lect the accelerated amorti#ation. his noti"ication o"

change (ould stem "rom market sur&eys assessing the demand "or the product.

d. he auditors need to &eri"y *"or material assets+ the appropriateness o" the

estimated li"e o" the asset. he auditors must determine i" the "irm has


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accurately estimated the li"e in years or in sales units. I" increased regulation is

e'pected to decrease sales *the auditors should re5uest market sur&ey results

and sales by territories as supporting e&idence+! then the asset may need to be

impaired i" it is (orth less than (as e'pected. hus the depreciation! depletion!

and amorti#ation output o" the "i'ed asset accounting system is based upon

assumptions. he auditors should e'amine the source documents in support o"

these assumptions.

INTERNAL CONTROL CASES

1+ =olution "or;olly Company Payroll =ystems


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C. Control Weaknesses

1+ =uper&ision H imekeeping process is unsuper&ised

2+ =egregation o" Buties H %ccounting Bepartment Prepares Paychecks

$+ =egregation o" Buties H %ccounting department maintains both sub and 9

accounts

)+ %ccounting ?ecords H Payroll dra(n on general cash account

+ =egregation o" Buties H %ccounting clerk prepares and signs paychecks

6+ =egregation o" Buties H oremen authori#e time cards and distribute

paychecks

7+ ransaction &eri"ication , Payroll clerk prepares paychecks (ithout

authori#ation "rom a personnel action "orm.

7


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d+ I Contols

e. =tudent solutions should address the "ollo(ing8

1+ Pro&ide super&ision o&er timekeeping Process

2+ Paychecks should be prepared by Payroll Bepartment

$+ Create separate 9 "unction or pro&ide access control to 9

)+ Astablish separate cash disbursement department

+ Astablish an Impress account "or payroll

6+ Amploy a paymaster to distribute paychecks to employees

7+ Feri"y the status o" employees be"ore preparing paychecks.


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2. =olution "or Walker /ooks! Inc.Payroll and i'ed%sset =ystems


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C. Control Weaknesses

P$)"o## S)s!*+

1+ =uper&ision H imekeeping process is unsuper&ised

2+ ransaction &eri"ication , Payroll clerk prepares paychecks (ithout

authori#ation "rom a personnel action "orm.

$+ =egregation o" Buties H %ccounts Payable department has access to

accounting records and also (rites checks.

Fi,*- Ass*! S)s!*+

1+ %ccounting ?ecords H ?e5uests "or "i'ed assets are in"ormally submitted

2+ %ccounting ?ecords H >pen P> is not closed (hen goods arri&e

$+ =uper&ision-%ccounting ?ecords H /lind copy o" P> should be pro&ided to

the recei&ing clerk.


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)+ =egregation o" Buties H %ccounts Payable department has access to

accounting records and also (rites checks.

B.

I Controls

A. lo(charts "or this part o" the case (ill &ary. =olutions should address the issues

presented in part C o" the case.


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$. =olution "or =teeles Payroll and i'ed %ssets

a! b! see "ollo(ing pages.

c!

Control Weaknesses-Fixed Asset System

1. Segregation of duties necessary for asset acquisition, maintenance, and

disposal (departmental manager has charge of all decisions).2. Need xed assets department to authorize the managers asset functions.!. No recei"ing department to prepare a recei"ing report for #$ to match

%ith purchase order, etc.

Control Weaknesses-Payroll System

1. Should ha"e personnel action form (pre"ents su&mitting time cards for

past employees, transaction authorization of time cards).2. 'imeeeping and personnel function should &e separated from

super"isor, so pay rates are less liely to contri&ute to fraud.!. Super"isor does the time card "erication and collecting and distri&uting

of paychecs. 'his allo%s the super"isor to "erify paychecs for false

employees and collect them for him*herself. # +paymaster should tae

responsi&ility to "erify and distri&ute checs to ensure no checs from

nonexisting employees.-. #$ should not re"ie% ash /is&ursement department acti"ities regarding

accuracy of paychec amounts and creating "oucher pacet.0. No ("eried) ournal "oucher from cash dis&ursement sent to general

ledger.

d!


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e,

Student solutions %ill "ary for this part of the case. 'hey should

address the internal control issues presented in part .


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). =olution "or usic =ource! Inc.Payroll and

i'ed %ssets


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C.Internal Control Weaknesses

Payroll

1+ ransaction %uthori#ation H Amployees Falidate their o(n time cards

2+ =egregation o" duties H =uper&isors should submit time card and also

prepare personnel action "orms that authori#e employees to be paid.

$+ Independent Feri"ication H he %P department should be in the process

to authori#e cash disbursements to (rite the payroll check.

)+ Independent Feri"ication H he general ledger department should

recei&e a journal &oucher "rom cash disbursements and an account

summary "rom the %P department.

+ Cash disbursements should prepare a single payroll check that is

deposited into an imprest account to co&er the paychecks.


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i'ed %ssets

1+ %ccounting ?ecords H


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0)


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. =olution "or reen ountain Co""ee ?oasters!Inc.Payroll and i'ed %sset

=ystems


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C. Internal Control Weaknesses

P$)"o##

1+ ransaction %uthori#ation H is ne&er closed (hen goods arri&e

2+ Independent Feri"ication H


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B.


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6. So#&!io !o O"i!sa+! b+ see diagrams on the "ollo(ing pages.

c+ Internal Control Weakness.

Co!"o# /*$k*ss*s i O"i!s P&"%'$s*s S)s!*+1+ he in&entory control is not separate "rom the purchasing. his could lead tounnecessary purchases.

2+ ?ecei&ing does not get a blind copy o" the P>. he blind copy (ould "orce therecei&ing clerk to count and inspect the goods to complete the recei&ing report. heclerk is only using the packing slip to prepare the recei&ing report.

$+ he recei&ing department does not send a copy o" the ?? to thepurchases-in&entory control department! thus the P? and P> are used to update thein&entory records be"ore the goods arri&e.

)+ he accounts payable department doesn3t recei&e the supplier3s in&oice! thus itonly reconciles and posts the liability "rom the P?! P>! and ??. he supplier3sin&oice instead is sent directly to the general ledger.

+ he eneral ledger should recei&e journal &ouchers and account summaries notthe &endor3s in&oice or the CB &oucher.

Co!"o# /*$k*ss*s i O"i!s P$)"o## S)s!*+1+ he Payroll department recei&es no personnel action "orm thus (hen preparingthe payroll register they are unable to &eri"y employee names and salaries.

2+ he current system has no paymaster. he paychecks are returned to thesuper&isors "or distribution to employees.

$+ eneral 9edger should not be updated "rom a CB disbursement &oucher. Itre5uires a "ormal Journal &oucher

Co!"o# /*$k*ss*s i O"i!s Fi,*- Ass*!s S)s!*+1+ he accounts payable department sets up a "i'ed asset liability based only on thein&oice. % three (ay match including the purchase order and the recei&ing reportshould be per"ormed be"ore recording the account payable.

2+ he accounts payable department should prepare an accounts payable summary thatgoes to the general ledger "unction.

$+ Cash disbursements should prepare a journal &oucher and send it to the general ledgerdepartment.)+


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Co!"o# /*$k*ss*s i O"i!s S$#*s O"-*" P"o%*ssi0 S)s!*+1+


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