[sdaccount]

An effective control that protects against the preparation of improper or inaccurate disbursements would be to require that all checks be

A. Signed by an officer after necessary supporting evidence has been examined.

B. Reviewed by the treasurer before mailing.

C. Sequentially numbered and accounted for by internal auditors.

D. Perforated or otherwise effectively canceled when they are returned with the bank statement.

I thought the Treasurer signs/mails the checks? The correct answer is “A” though with the explanation of “requiring an officer to sign a check only after necessary supporting evidence is provided will be an effective internal control measure. This procedure would allow checks to only be written for disbursements which have accurate, supporting documentation.”

Is it assumed that the checks require 2 signatures? Wouldn’t the Accounts Payable dept match and verify the supporting docs before approving payment prior to sending them to the Treasurer? No where in the flows does an officer appear for verification. I hate this question!!! ARRRGGGG!!!!!!

[Anonymous]

At a company I used to work for, I spent half of my time in the A/P department (other half was spent doing Fixed Assets). So I will tell you what the company did which will hopefully help answer your question. I know that experience really helped me understand the A/P cycle…

When we got an invoice from a vendor for goods, we printed off the corresponding purchase order and receiving report. This verified that we were billed for what we ordered and what we received. If there were any discrepancies, we had to resolve them before we could pay the bill.

When we got an invoice for services, we had to send the invoice to the person responsible for requesting/overseeing those services to sign off on them. This let us know that those services had been performed satisfactorily and that the invoice was approved for payment.

Then we cut the checks and paperclipped them to the supporting documentation. Then they were given to the Treasurer to sign.

It was the Treasurer's job to not only sign off on the checks, but also to do a quick double-check to make sure the checks had the proper supporting documentation.

It would not be good internal control for the Treasurer to just sign off on a check without having supporting documentation. For instance, you could have employee collusion in the A/P department to pay off everyone's credit card bill. If you gave a check to the Treasurer made payable to Visa without supporting documentation, she could have thought it was for the company's Visa.

I hope that makes sense.

What's crazy is my former boss embezzled from a company she went to work for after she left the company where I worked. Here's the news article in case you're interested…

https://www.fbi.gov/washingtondc/press-releases/2010/wfo041510a.htm

[HustlinHustlin]

I also have a question. One of my MCQ States that an entity internal control requires that there be an approved voucher, supported by prenumbered purchase order, and prenumbered receiving report. To determine whether checks are being issued for unauthorized expenditures the auditor would select a sample from canceled checks.

Why canceled checks? Wouldn't checks that WERE issued give us a better indication of authorization?

B 71 - 79 EXPIRED
A 69 - 75 EXPIRED
R 65 - 48 - 45
F 56 - 61 - 65 - 64

Becker, Wiley Test Bank, Wiley Text and Ninja Notes

"The fish who keeps on swimming is the first to chill upstream" -311

Experience - Done, like WAAAY done.
Still need 30 more credits, in basket weaving (gotta love new CA requirements)

[Anonymous]

To specifically answer this question… Is it assumed that the checks require 2 signatures?

I think it means 2 levels of approval – one from the A/P dept. and one from the Treasurer – but not 2 signatures on the check.

[Anonymous]

@ Hustlin – canceled checks are ones that have already cleared the bank. Voided checks are ones that weren't issued

[sdaccount]

Thanks for the reply and the link. Very interesting. 40k to pay off credit card debts? Sheesh. Did you suspect it? Was your supervisor hard to work with?

The information and experience you stated makes sense. You'd verify the docs and approve for payment. The treasurer would also perform a double check on the supporting docs before blindly signing all checks.

The question though. And I think I see why its “A”. I answered B and B stated “B. Reviewed by the treasurer before mailing.” The treasurer does review, but they also sign the check. Answer B mentions no action of signing the check. Answer A (Assuming the treasurer is an officer of the company or assuming the officer has authorization rights) will sign the check after the supporting docs have been verified.

[Anonymous]

I see what you're saying about the question. It's definitely a case of narrowing it down to 2 possible choices and then choosing the best answer. Gotta love Audit!

In my experience (and please someone correct me if I'm wrong), not all companies are large enough to actually have a separate Treasurer. The company where I worked in A/P was fairly large, and then when I went to work for a smaller company, it was the CFO who signed the checks. So I think that's why they are saying Officer… because it doesn't necessarily have to be the Treasurer, but it does need to be someone high up in the company that is not in charge of recordkeeping like Staff Accountants.

The embezzlement happened at a different company. When I left the govt. contractor where she was my boss back in 2003, she was still there. But when I left they had me do an exit questionnaire. On the questionnaire, it asked if I had ever witnessed anything unethical going on in the company. I knew my boss would log into Costpoint as receiving dept. employees and receive goods under their name so we could get invoices paid, so I put that on there. And she left the company soon after I did, but I never knew why. I've always wondered if it was because of what I put on that questionnaire when I left, but I guess I'll never know. It was definitely a weak control on the company's part… but she was obviously using it to her advantage. She was a cool boss. Very laid back and nice. She did spend a lot of money though – she was always buying nice cars and going on vacations. I guess it caught up with her.

[Author]

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