The Alden Company

Exercise 11-12

A. Alden should set up a policies and procedures manual which would notify workers;

* Of the type of source documents people should use to record inventory.

* Take reports of the correct actions to put in order back up data for these documents.

* A comprehensive portrayal of the person in charge and responsibility assigned to each person.

* A chart of accounts that clarifies each general ledger account so that staff will record debits and credits of accounting transactions in the proper accounts.

* Describe what job duties consist of.

B. Raw materials are being removed from the storeroom upon written or oral approval from one of the production foremen: However, the raw materials should be removed from the store room only on the written endorsement from an authorized production foreman. The authorizations should be numbered in serial, signed and dated to leave an audit trail. I think that the storeroom clerks should have to sign and initial some type of source document (issuance report) to whom the part has been issued.

C. The perpetual inventory system should be utilized instead of the physical inventory system. Inventory records should be coordinated with the general ledger at routinely.

D. The merchandise received is not inspected: The goods should be inspected to comply with the standard of quality upon the receipt.

E. All vendors bills of laden are initialed, dated, and filed in the storeroom to serve as receiving reports: The vendors' bill of laden should have more than one copies. One should be stored in the storage room and another copy should be stored elsewhere for the records for back-up.

F. Four stock clerks' is a large group for a stockroom. If the company is not a big it should reduce stock clerks. If it is a big company the stock clerks should have separation of duties.

G. The company needs to make reviews periodically to assess the effectiveness and competence of the department.

12-23

1. Arthur should have had an audit trail for the revenue and purchases and he should have separation of duties. He should have had a receiving report for when a shipment arrives. This receiving source document should provide the description of delivery, date it was received, vendor, shipper, and purchase order number.

2. Arthur had ignored some significant issues while dealing with his company. He did not pay attention to his employee's working habits. He could not recognize Benny, who was the main person involved in the conspiracy. The deception that was performed by him could not