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AC 410 Unit 6 Homework Assignment
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Questions Requiring Analysis 12-21
Nolan Manufacturing Company retains you on April 1 to perform an
audit for the fiscal year ending June 30. During the month of May, you
make extensive studies of internal control over inventories.
All goods purchased pass through a receiving department under the
direction of the chief purchasing agent. The duties of the receiving
department are to unpack, count, and inspect the goods. The quantity
received is compared with the quantity shown on the receiving
department’s copy of the purchase order. If there is no discrepancy, the
purchase order is stamped “OK—Receiving Dept.” and forwarded to the
accounts payable section of the accounting department. Any
discrepancies in quantity or variations from specifications are called to
the attention of the buyer by returning the purchase order to him with
an explanation of the circumstances. No records are maintained in the
receiving department, and no reports originate there.