Each of the points listed next represents an internal control that may be implemented within a company"s accounting information system to reduce various risks. For each point, identify the appropriate business process (revenue, expenditure, conversion, administrative). In addition, refer to the description of business processes under Study Objective 2 in this chapter, and identify the appropriate subprocess. (Some subprocesses may be used more than once, and others may not be used at all.) Customer credit must be authorized before a business transaction takes place. An authorized price list of goods for sale is provided. A shipping report is prepared for all shipments of goods so that customers may be billed in a timely manner. Access to personnel files and paycheck records is available only in accordance with management specifications. New vendors are required to be authorized before a business transaction takes place. Access to cash is restricted to those employees authorized by management. Costs of goods manufactured is properly summarized, classified, recorded, and reported. Amounts due to vendors are reconciled by comparing company records with statements received from the vendors. Employee wage rates and paycheck deductions must be authorized by management. Specific procedures such as the performance of a background check are carried out for all new employee hires. The purchasing manager is notified when stock levels are low so that items may be restocked to prevent backorders. Two signatures are required on checks for payments in excess of $5000. When excess cash is on hand, the funds are invested in short-term securities. Goods received are inspected, and any damaged or unmatched items are promptly communicated to the vendor. The monthly bank statement is reconciled to the company"s cash records by an outside accountant.
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