Ict 2 Finals Exam Besa Bsa2a

NAME: Angela Joy J.
Besa COURSE: ICT 5

SCORE
SECTION: BSA-2A DATE: 05-25-2020
FINALS EXAMINATION
PART I: MULTIPLE CHOICE. SELECT THE BEST ANSWER TO THE FOLLOWING QUESTIONS. (2 PTS. EACH)
B 1. The document that captures the total amount of time that individual workers spend on each production
job is called a
A. Time Card C. Personnel Action Form
B. Job Ticket D. Labor Distribution Form
A 2. An important reconciliation in the payroll system is when

A. The General Ledger Department C. The Production Department compares the
compares the Labor Distribution number of hours reported on Job Tickets to the
Summary from cost accounting to the number of hours reported on Time Cards.
Disbursement Voucher from Accounts
Payable.
B. The Personnel Department compares D. The Payroll Department compares the Labor
the number of employees authorized Distribution Summary to the hours reported on
to receive a paycheck to the number Time Cards.
of paychecks prepared.
A 3. Which internal control is not an important part of the payroll system?

A. Supervisors verify the accuracy of C. The Accounts Payable Department verifies the
employee Time Cards accuracy of the Payroll Register before
transferring payroll funds to the general checking
B. Paychecks are distributed by an D. The General Ledger Department reconciles the
independent Paymaster Labor Distribution Summary and the Payroll
Disbursement
C 4. The department responsible for approving pay rate changes is

A. Payroll C. Personnel
B. Treasurer D. Cash Disbursements
C 5. Which function should distribute paychecks?

A. Personnel C. Paymaster
B. Timekeeping D. Payroll
C 6. Which transaction is not processed in the fixed asset system?

A. Purchase of building C. Purchase of raw materials
B. Repair of equipment D. Sale of company van
B 7. Depreciation…
A. is calculated by the department that C. is recorded weekly
uses the fixed asset.
B. allocates the cost of the asset over its D. results in book value approximating fair market
useful life value
A 8. Depreciation records include all of the following information about fixed assets EXCEPT the
A. Economic benefit of purchasing the C. Depreciation method being used
asset
B. Cost of the asset D. Location of the asset
B 9. Which control is not a part of the fixed asset system?

A. Formal analysis of the purchase C. Development of an Economic Order Quantity
request Model
B. Review of the assumptions used in the D. Estimates of anticipated Cost Savings
Capital Budgeting Model
D 10. Objectives of the fixed asset system do NOT include

A. Authorizing the acquisition of Fixed C. Computing gain and/or loss on the disposal of
Assets. fixed assets.
B. Recording depreciation expense. D. Maintaining a record of the fair market value of
all fixed assets.
PART II: ESSAY. PROVIDE THE REQUIREMENT FOR EACH OF THE ITEMS BELOW. (10 PTS. EACH)
1. PAYROLL FRAUD
John Smith worked in the stockyard of a large building supply company. One day he unexpectedly left for California,
never to return. His foreman seized the opportunity to continue to submit time cards for John to the payroll
department.
Each week, as part of his normal duties, the foreman received the employee paychecks from payroll and distributed
them to the workers on his shift. Because John was not present to collect his paycheck, the foreman forged John’s name
and cashed it.
Required:
Describe two control techniques to prevent or detect this fraud scheme.
1. An employee action report from the personnel department should list all current employees. Time cards for terminated
or nonexistent employees should be identified when reconciled with the personnel report.
2. An independent paymaster should distribute the paychecks to the employees. If an employee is not present to receive
the paycheck, it should be returned to the payroll department.
2. PAYROLL CONTROLS
Sherman Company employs 400 production, maintenance, and janitorial workers in eight separate departments. In
addition to supervising operations, the supervisors of the departments are responsible for recruiting, hiring, and firing
workers within their areas of responsibility. The organization attracts casual labor and experiences a 20 to 30 percent
turnover rate in employees per year.
Employees clock on and off the job each day to record their attendance on time cards. Each department has its own
clock machine located in an unattended room away from the main production area. Each week, the supervisors gather
the time cards, review them for accuracy, and sign and submit them to the payroll department for processing. In
addition, the supervisors submit personnel action forms to reflect newly hired and terminated employees. From these
documents, the payroll clerk prepares payroll checks and updates the employee records. The supervisor of the payroll
department
signs the paychecks and sends them to the department supervisors for distribution to the employees. A payroll register
is sent to accounts payable for approval. Based on this approval, the cash disbursements clerk transfers funds into a
payroll clearing account.
Required:
Discuss the risks for payroll fraud in the Sherman Company payroll system. What controls would you implement to
reduce the risks?
Risks
1. The high degree of casual labor creates and environment that lends itself to abuse.
2. Foremen distributes the paychecks to the employees, checks written for nonexistent employees can be kept and
cashed by the foremen.
3. Clock machines are unsupervised and are located in remote areas.
4. Foremen have too much control over the human resources they are responsible for recruiting, firing, hiring.
Controls
1. Authorization: A separated personnel function should be established to account for employees and to authorize their
payment.
2. Segregation of Duties: The department supervisors should not distribute the paychecks to employees. This should be
the task of a paymaster.
3. Supervision: The clocking in and out process should be supervised.
3. FIXED ASSET SYSTEM

The fixed asset acquisition procedures for Turner Brothers, Inc., are as follows:
Supervisors in the user departments determine their fixed asset needs and submit bids or orders directly to contractors,
vendors, or suppliers. In the case of competitive bidding, the user makes the final selection of the vendor and negotiates
the prices paid. The assets are delivered directly to the user areas. The users inspect and formally receive the assets.
They submit the invoice to the cash disbursements department for payment.
Required:
Discuss the risks associated with this process. Describe the controls that should be implemented to reduce these risks.
Risks
1. The super visor places the order without taking approval from fixed asset accounting department. This can lead to the
risk of unofficial acquisition of fixed asset.
2. In the given process, supervisor selects the vendor. Therefore, there is a chance that supervisor will show high value of
fixed asset in records for taking personal benefits.
Controls
1. Implementing formal procedures for approving user request for assets.
2. A fixed asset function should be implemented to account for acquisition, use, and disposal of the assets.
3. The invoice, receiving report, and approved purchase order should be reviewed by accounts payable which authorizes
payments by cash disbursements.
4. FIXED ASSET FRAUD

Holder Co. maintains a large fleet of automobiles, trucks, and vans for their service and sales force. Supervisors in the
various departments maintain the fixed asset records for these vehicles, including routine maintenance, repairs, and
mileage information. This information is periodically submitted to the fixed asset department, which uses it to calculate
depreciation on the vehicle. To ensure a reliable fleet, the company disposes of vehicles when they accumulate 80,000
miles of service. Depending on usage, some vehicles reach this point sooner than others. When a vehicle reaches 80,000
miles, the supervisor is authorized to use it in trade for a new replacement vehicle or to sell it privately.
Employees of the company are given the first option to bid on the retired vehicles. Upon disposal of the vehicle, the
supervisor submits a disposal report to the fixed asset department, which writes off the asset.
Required:
Discuss the potential for abuse and fraud in this system. Describe the controls that should be implemented to reduce the
risks.
Risks
1. The manager did not fill out the disposal report accurately. It would not be difficult for the manager to indicate that he
or she donated or scrapped the vehicle when they actually sold it for more than salvage value.
2. Users can overstate mileage to accelerate the depreciation on a vehicle to reduce the book value of the asset.
3. Supervisor has discretion to dispose of the asset as he sees fit.
Controls
1. Formal procedures for disposal of assets by an independent group.
2. Periodic audits of the assets to verify their mileage and condition.
3. Private sale of used vehicles to employees should be on an open-bid basis.

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NAME: Angela Joy J.

Besa COURSE: ICT 5

A 2. An important reconciliation in the payroll system is when

A 3. Which internal control is not an important part of the payroll system?

C 4. The department responsible for approving pay rate changes is

C 5. Which function should distribute paychecks?

C 6. Which transaction is not processed in the fixed asset system?

B 9. Which control is not a part of the fixed asset system?

D 10. Objectives of the fixed asset system do NOT include

3. FIXED ASSET SYSTEM

4. FIXED ASSET FRAUD

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