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Week Two 1
Week Two Learning Team Assignment
Learning Team B
David Drabble, Amanda Henderson, Shawnte McKinnon, and Shane Walden
University of Phoenix
ACC/400
Maureen Breen
June 14, 2010
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Week Two 2
Week Two Learning Team Assignment
E7-2
There are six principles of internal control that according to Kimmel, Weygandt, and
Kieso (2007, p 317), “safeguard assets and enhance the accuracy and reliability of accounting
records.” Businesses chose the control measures used depending on their operations and
industry. In Culotti’s Pizza, customers can see most of the six principles in action. The six
principles and examples seen within Culotti’s are:
1. Establishment of responsibility is when one person is responsible for a specific task. In
Culotti’s one person is working the cash register, another is taking orders, one is making
pizzas, one is making other dishes the restaurant offers customers. By giving an
employee one task to focus on, no one is duplicating efforts and customers get the best
quality and attention from employees.
2. Segregation of duties is when one employee validates the work of another without
duplication. In Culotti’s, the person running the register verifies the orders being taken
and that the correct food was prepared. The food preparers also verify the orders.
3. Documentation procedures is when employees provide source documents for accounting
to record the transaction. In Culotti’s, the order taker and the employee working the cash
register provide receipts to accounting.
4. Physical, mechanical, and electronic controls are controls that assist in maintaining
control including safes, locks on storage cabinets, computers with passwords, alarms,
security systems, and time clocks. In Culotti’s, a customer would see a security camera to
prevent theft.
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Week Two 3
5. Independent internal verification is a third party verification of records to find
discrepancies and help management make changes. Customers would not see this internal
control when picking up a pizza at Culotti’s.
6. Other controls include bonding employees that handle cash, rotate duties and enforce
vacations, and background checks of employees. Customers would not see this internal
control when picking up a pizza at Culotti’s.
P7-2A
1. One the church must establish responsibility. Kimmel, Weygandt & Kieso (2007), note
that to maintain effective control only one person is responsible for a given task. It
appears that church has not identified a person to control the cash.
2. The church will need to have segregation of duties. This allows the work to not be
duplicated and limit the control one person have over the monies. So, accounts receivable
and account payable should be assigned to separate people. This means that the one who
holds the asset is different from one who controls the asset. What specific tasks would
you segregate in this situation?
3. Documentation procedures will need to be in place. This provides evidence that
transactions and events have occurred. All source documents will need to be forwarded
promptly to the accounting department.
4. The church should have physical, mechanical, and electronic controls in place to
safeguard any of the church’s assets. Such as?
5. Last, the church needs independent verification. Essentially, this is an audit.
Reconciliation of ? should be done on a monthly basis as well as a surprise audit of?.
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Week Two 4
P7-2B
To start with, the church lacks a formalized account management structure. There was
neither any auditing process and nor financial transparency or verifiability. In addition, the
church member could write the checks payable to cash, which is an alarming practice, as owning
to lack of accountability anybody could cash the checks.
To ensure reliability of funds and accounts management, internal control processes and
procedures are imperative. This can be done by work segregation, which ensures transparency in
business operations and account management. In this method, each employee will be responsible
for carrying out only pre-designated tasks (Commonwealth Secretariat, 2005). For example, the
finance secretary will be responsible of collecting funds, counting and recounting it on a regular
basis, expense estimation, maintaining bank account details, and bookkeeping. In the morning,
the finance secretary will open the cash box, recount the funds, and deposits all the money in the
bank other than $250 - $300, depending on the funds required to cover cash expenses for the
coming week. Likewise, the head usher will be responsible of maintaining bank reconciliation
statements, and other usher will handle the task of depositing the funds in the bank and later
handling over the deposit receipt to the secretary. This method will ensure that there are no
disparities between receiving, recording, and depositing the funds, thereby greatly reducing any
chances of cash being stolen or recorded incorrectly.
To make sure that the funds are managed properly, the finance committee should
formulate rules and regulations that make it mandatory for any denotation to be accepted in form
of checks and no cash or cash-checks will be entertained. Fund management is an important
issue; the committee should not scrap any receipts, thereby maintaining supporting information
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Week Two 5
until all account verification is complete. The committee should take a more active role in
operation of the business to detect any accounting irregularities (Commonwealth Secretariat,
2005).
P7-2C
“According to some evidence, up to one-third of U.S. employees have stolen from their
employers,” (Kimmel, Weygandt & Kieso, 2007, p 314). However, sometimes losses in assets
are unintentional. Churches operate much like a company; they have assets and liabilities just
like any other firm. From the given information there are some glaring circumstances concerning
the church’s collection and counting procedures. Having a three-person audit team is a good
place to start. However, more controls will need to be set in place as well as more segregation of
duties. Specific control measures can vary depending upon an organization’s circumstances,
needs and management philosophy. The two primary reasons firms conduct internal controls are
to safeguard their assets and enhance the reliability of their accounting records (Kimmel,
Weygandt & Kieso (2007). Errors in accounting can be unintentional and intentional, that is why
a sound system of checks and balances are necessary.
There are several suggestions to improve internal controls. Conduct routine internal
independent verification to ensure proper guidelines are being followed (Kimmel, Weygandt,
Kieso, 2007). Bonding of church employees who regularly are responsible for the primary
collection and counting of tithes, offering, and donations. This step will benefit the church in
several ways. Foremost, it will allow the church to obtain insurance protection from any
misappropriation of funds by workers. Secondly, background checks and other screenings should
be conducted to ensure that potential untrustworthy individuals are not put into money sensitive
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Week Two 6
positions. Workers involved in the collection and counting of funds will be made aware of
prosecution if evidence of intentional theft has occurred.
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Week Two 7
References
Commonwealth Secretariat. (2005). Guidelines for Public Financial Management Reform.
Retrieved June 13, 2010, from
http://www.mof.go.jp/jouhou/kokkin/tyousa/1803pfm_17.pdf
Kimmel, P. D., Weygandt, J. J., & Kieso, D.E. (2007). Financial accounting: Tools for business
decision making (4th ed.). Hoboken, NJ: John Wiley & Sons.

Unformatted Attachment Preview

Week Two Week Two Learning Team Assignment Learning Team B David Drabble, Amanda Henderson, Shawnte McKinnon, and Shane Walden University of Phoenix ACC/400 Maureen Breen June 14, 2010 1 Week Two 2 Week Two Learning Team Assignment E7-2 There are six principles of internal control that according to Kimmel, Weygandt, and Kieso (2007, p 317), “safeguard assets and enhance the accuracy and reliability of accounting records.” Businesses chose the control measures used depending on their operations and industry. In Culotti’s Pizza, customers can see most of the six principles in action. The six principles and examples seen within Culotti’s are: 1. Establishment of responsibility is when one person is responsible for a specific task. In Culotti’s one person is working the cash register, another is taking orders, one is making pizzas, one is making other dishes the restaurant offers customers. By giving an employee one task to focus on, no one is duplicating efforts and customers get the best quality and attention from employees. 2. Segregation of duties is when one employee validates the work of another without duplication. In Culotti’s, the person running the register verifies the orders being taken and that the correct food was prepared. The food preparers also verify the orders. 3. Documentation procedures is when employees provide source documents for accounting to record the transaction. In Culotti’s, the order taker and the employee working the cash register provide receipts to accounting. 4. Physical, mechanical, and electronic controls are controls that assist in maintaining control including safes, locks on storage cabinets, computers with passwords, alarms, security systems, and time clocks. In Culotti’s, a customer would see a security camera to prevent theft. Week Two 3 5. Independent internal verification is a third party verification of records to find discrepancies and help management make changes. Customers would not see this internal control when picking up a pizza at Culotti’s. 6. Other controls include bonding employees that handle cash, rotate duties and enforce vacations, and background checks of employees. Customers would not see this internal control when picking up a pizza at Culotti’s. P7-2A 1. One the church must establish responsibility. Kimmel, Weygandt & Kieso (2007), note that to maintain effective control only one person is responsible for a given task. It appears that church has not identified a person to control the cash. 2. The church will need to have segregation of duties. This allows the work to not be duplicated and limit the control one person have over the monies. So, accounts receivable and account payable should be assigned to separate people. This means that the one who holds the asset is different from one who controls the asset. What specific tasks would you segregate in this situation? 3. Documentation procedures will need to be in place. This provides evidence that transactions and events have occurred. All source documents will need to be forwarded promptly to the accounting department. 4. The church should have physical, mechanical, and electronic controls in place to safeguard any of the church’s assets. Such as? 5. Last, the church needs independent verification. Essentially, this is an audit. Reconciliation of ? should be done on a monthly basis as well as a surprise audit of?. Week Two 4 P7-2B To start with, the church lacks a formalized account management structure. There was neither any auditing process and nor financial transparency or verifiability. In addition, the church member could write the checks payable to cash, which is an alarming practice, as owning to lack of accountability anybody could cash the checks. To ensure reliability of funds and accounts management, internal control processes and procedures are imperative. This can be done by work segregation, which ensures transparency in business operations and account management. In this method, each employee will be responsible for carrying out only pre-designated tasks (Commonwealth Secretariat, 2005). For example, the finance secretary will be responsible of collecting funds, counting and recounting it on a regular basis, expense estimation, maintaining bank account details, and bookkeeping. In the morning, the finance secretary will open the cash box, recount the funds, and deposits all the money in the bank other than $250 - $300, depending on the funds required to cover cash expenses for the coming week. Likewise, the head usher will be responsible of maintaining bank reconciliation statements, and other usher will handle the task of depositing the funds in the bank and later handling over the deposit receipt to the secretary. This method will ensure that there are no disparities between receiving, recording, and depositing the funds, thereby greatly reducing any chances of cash being stolen or recorded incorrectly. To make sure that the funds are managed properly, the finance committee should formulate rules and regulations that make it mandatory for any denotation to be accepted in form of checks and no cash or cash-checks will be entertained. Fund management is an important issue; the committee should not scrap any receipts, thereby maintaining supporting information Week Two 5 until all account verification is complete. The committee should take a more active role in operation of the business to detect any accounting irregularities (Commonwealth Secretariat, 2005). P7-2C “According to some evidence, up to one-third of U.S. employees have stolen from their employers,” (Kimmel, Weygandt & Kieso, 2007, p 314). However, sometimes losses in assets are unintentional. Churches operate much like a company; they have assets and liabilities just like any other firm. From the given information there are some glaring circumstances concerning the church’s collection and counting procedures. Having a three-person audit team is a good place to start. However, more controls will need to be set in place as well as more segregation of duties. Specific control measures can vary depending upon an organization’s circumstances, needs and management philosophy. The two primary reasons firms conduct internal controls are to safeguard their assets and enhance the reliability of their accounting records (Kimmel, Weygandt & Kieso (2007). Errors in accounting can be unintentional and intentional, that is why a sound system of checks and balances are necessary. There are several suggestions to improve internal controls. Conduct routine internal independent verification to ensure proper guidelines are being followed (Kimmel, Weygandt, Kieso, 2007). Bonding of church employees who regularly are responsible for the primary collection and counting of tithes, offering, and donations. This step will benefit the church in several ways. Foremost, it will allow the church to obtain insurance protection from any misappropriation of funds by workers. Secondly, background checks and other screenings should be conducted to ensure that potential untrustworthy individuals are not put into money sensitive Week Two positions. Workers involved in the collection and counting of funds will be made aware of prosecution if evidence of intentional theft has occurred. 6 Week Two 7 References Commonwealth Secretariat. (2005). Guidelines for Public Financial Management Reform. Retrieved June 13, 2010, from http://www.mof.go.jp/jouhou/kokkin/tyousa/1803pfm_17.pdf Kimmel, P. D., Weygandt, J. J., & Kieso, D.E. (2007). Financial accounting: Tools for business decision making (4th ed.). Hoboken, NJ: John Wiley & Sons. Name: Description: ...
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