A Weak Internal Control System Allows a Department Supervisor to "Clock

question 107

Multiple Choice

A weak internal control system allows a department supervisor to "clock in" for a fictitious employee and then approve the employee's time card at the end of the pay period. This fraud would be detected if other controls were in place, such as having an independent party

• A) distribute paychecks.
• B) recompute hours worked from time cards.
• C) foot the payroll journal and trace postings to the general ledger and the payroll master file.
• D) compare the date of the recorded check in the payroll journal with the date on the canceled checks and time cards.

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Definitions:

Operating Income

The profit earned from a firm's regular core business operations, excluding deductions of interest and tax.

Operating Expenses

Costs incurred in the normal operations of a business, such as salaries, utilities, and rent, exclusive of cost of goods sold.

Revenue Recognition

Revenue Recognition is the accounting principle that dictates the specific conditions under which income becomes recognized as revenue.