Page 320 - Accounting Information Systems

CHAPTE R 6 The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures 291

8. Depreciation records include all of the following a. authorizing the acquisition of fixed assets.
information about fixed assets EXCEPT the b. recording depreciation expense.
a. economic benefit of purchasing the asset. c. computing gain and/or loss on the disposal of
b. cost of the asset. fixed assets.
c. depreciation method being used. d. maintaining a record of the fair market value of
d. location of the asset. all fixed assets.
9. Which control is not a part of the fixed asset 11. Which of the following is NOT a characteristic of
system? the fixed asset system?
a. formal analysis of the purchase request a. acquisitions are routine transactions requiring
general authorization
b. review of the assumptions used in the capital
budgeting model b. retirements are reported on an authorized dis-
posal report form
c. development of an economic order quantity
model c. acquisition cost is allocated over the expected
life of the asset
d. estimates of anticipated cost savings
d. transfer of fixed assets among departments is
10. Objectives of the fixed asset system do NOT
recorded in the fixed asset subsidiary ledger
include

Problems

1. PAYROLL FRAUD
PROBLEM 2: PAYROLL CONTROLS
John Smith worked in the stockyard of a large building
supply company. One day he unexpectedly left for Payroll
California, never to return. His foreman seized the op- Employee Supervisor Department
portunity to continue to submit time cards for John to
the payroll department. Each week, as part of his normal Time Time Time
Card Card Card
duties, the foreman received the employee paychecks
from payroll and distributed them to the workers on his Supervisor Approves
and Signs Time Cards
shift. Because John was not present to collect his pay-
check, the foreman forged John’s name and cashed it. Prepare
Paychecks
Required
Describe two control techniques to prevent or detect this
fraud scheme.

Paycheck Paycheck Paycheck
2. PAYROLL CONTROLS
Refer to the flowchart for Problem 2. Supervisor Distributes
Paychecks to Employees
Required
a. What risks are associated with the payroll proce-
dures depicted in the flowchart? recruiting, hiring, and firing workers within their areas
b. Discuss two control techniques that will reduce of responsibility. The organization attracts casual labor
or eliminate the risks. and experiences a 20 to 30 percent turnover rate in
employees per year.
Employees clock on and off the job each day to re-
3. PAYROLL CONTROLS cord their attendance on time cards. Each department
Sherman Company employs 400 production, mainte- has its own clock machine located in an unattended
nance, and janitorial workers in eight separate depart- room away from the main production area. Each week,
ments. In addition to supervising operations, the the supervisors gather the time cards, review them for
supervisors of the departments are responsible for accuracy, and sign and submit them to the payroll