Miscellaneous Cycles

Question 1

Identify the objectives of internal control related to the production/manufacturing inventory transaction cycle.

Answer 1

1. )”Resources obtained and used are accurately recorded in a timely manner.
2. )Transfers of finished goods are accurately recorded.
3. )Related expenditures are appropriately classified.
4. )Access to inventory is restricted to authorized personnel.
5. )Comparisons are made of actual inventory to recorded amounts.

Question 2

Describe management’s role in the execution of transactions controls in the production/manufacturing inventory transaction cycle.

Answer 2

1. )Acquisition and distribution of inventory should be in accordance with management’s authorization.
2. )Management should establish general approval of transactions with specified limits and require specific approval for amounts over those limits.
3. )Management should approve any adjusting journal entries.

Question 3

Identify the objectives of internal control in the fixed assets transaction cycle.

Answer 3

1. )Transactions are recorded accurately in accordance with management’s authorization.
2. )Estimates used to record depreciation and the like are reasonable and consistent over time.
3. )Assets are safeguarded with appropriate property insurance in force.
4. )Supporting details records are properly maintained.
5. )Management approves any adjusting journal entries.

Question 4

Identify the objectives of internal control in the investing/financing transaction cycle.

Answer 4

1. )Transactions are recorded accurately in accordance with management’s authorization.
2. )Investment assets should be reasonably secure from loss.
3. )Supporting detailed records should be maintained and compared to the general ledger.
4. )Management approves any adjusting journal entries.

Question 5

How should employee responsibilities be allocated to facilitate a proper segregation of duties in the production/manufacturing inventory transaction cycle.?

Answer 5

1. )Authorization, bookkeeping (recording), and custody of inventory should be separate.
2. )Sales returns should be counted by receiving clerk, who prepares an appropriate receiving document.