Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $937 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $937 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: Identify the weaknesses in Signet Corporation’s internal control. Explain several audit procedures that might disclose the fraudulent disbursement.
Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $937 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $937 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: Identify the weaknesses in Signet Corporation’s internal control. Explain several audit procedures that might disclose the fraudulent disbursement.
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments
Section: Chapter Questions
Problem 32CYBK
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Henry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $937 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $937 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations.
Required:
- Identify the weaknesses in Signet Corporation’s internal control.
- Explain several
audit procedures that might disclose the fraudulent disbursement.
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