3. Nina Incorporated is a large grocery wholesaler. The following misstatements

Question

3. Nina Incorporated is a large grocery wholesaler. The following misstatements have misstatement, identify a missing internal control that would have prevented or detected the problem and identify the transaction related audit objective that was not met: For large shipments of fresh vegetables and meats, employees took small "samples" of inventory before shipping the goods to retailers. The amounts taken for each shipment were immaterial but collectively are significant. The "samples" were tested in the workers' homes for quality. An accounts payable clerk added his name to the vendor list and regularly approved and processed payments to his self even though he provided no services. There is no supporting documentation for the payment. A vendor's invoice was paid twice when the vendor sent a second copy of the invoice just after the payment was sent. The payment arrived at the vendor's bank while the second invoice was in the mail. A salesperson approved the sale of a truckload of beef below cost to meet her sales total to receive a bonus. Employees periodically lowered the receiving reports for goods received and took the extra items home. This was not detected because the Accounts Payable clerks did not compare receiving reports with bills before payment a. b. c. d. e.

Explanation / Answer

S.No. Internal Control Missing Audit Objective a Recording of each transaction classifying seperately the sample taken and the material received. Reconciliation of ggod received and recorded Classification b Segregation of duties.No one person should have access of physical cash and the books of accounts. Work of one person should be checked by another person. Existence, Accuracy c Double check and physical reconciliation. The invoices received should be cross checked for the goods received. Accuracy d Cut off check. No sales person shall have the authority to sale any goods below the cost price. Cut off, Realizable value e Regular Auidt of Physical items. There should be a system of comapring reports with bills before payments are released Authorization, Classification

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