Question: What is the difference between an internal auditor and an external auditor?
The main difference between the internal and external auditor is that the internal auditor is a regular team member of the organization and the external auditor is not.
An outside accountant, utterly independent of the business, evaluates the controls to ensure that the financial statements are presented relatively by GAAP. The company does not control the external auditor.
An internal auditor is a team member of the company and works according to the company policies. On the other hand, the external auditor is an outside accountant who works independently of the business.
The internal auditor examines whether or not the company is following the legal requirements related to internal control. On the other hand, an external auditor examines whether financial statements are prepared by following the GAAP or not.
Evaluating internal control over cash receipts Dogtopia sells pet supplies and food and handles all sales with a cash register. The cash register displays the amount of the sale. It also shows the cash received and any change returned to the customer. The register also produces a customer receipt butkeeps no internal record of the transactions. At the end of the day, the clerk counts the cash in the register and gives it to the cashier for deposit in the company bank account.
1. Identify the internal control weakness over cash receipts.
2. What could you do to correct the weakness?
Preparing a bank reconciliation and journal entries
The May cash records of Donald Insurance follow:
Cash Receipts Cash Payments
Date Cash Debit Check No. Cash Credit
May 4 $ 4,230 1416 $ 890
9 520 1417 120
14 530 1418 630
17 1,950 1419 1,090
31 1,840 1420 1,420
Donald’s Cash account shows a balance of $17,750 at May 31. On May 31, Donald
Insurance received the following bank statement:
Deposits and other Credits:
Checks and other Debits:
11 (check no. 1416)
22 (check no. 1417)
29 (check no. 1418)
31 (check no. 1419)
EFT $ 450
Bank Statement for May
Explanations: BC–bank collection; EFT–electronic funds transfer;
NSF–nonsufficient funds checks; SC–service charge
Additional data for the bank reconciliation follow:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance
b. The NSF check was received from a customer.
c. The $1,700 bank collection was for a note receivable.
d. The correct amount of check 1419, for rent expense, is $1,900. Donald’s controller
mistakenly recorded the check for $1,090.
1. Prepare the bank reconciliation of Donald Insurance at May 31, 2018.
2. Journalize any required entries from the bank reconciliation
Journalizing petty cash
Prepare the journal entries for the following petty cash transactions of Everly Gaming
March 1 Established a petty cash fund with a $250 balance.
31 The petty cash fund has $24 in cash and $235 in petty cash tickets
that were issued to pay for Office Supplies ($35) and Entertainment
Expense ($200). Replenished the fund and recorded the expenditures.
April 15 Increased the balance of the petty cash fund to $300.
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