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BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7 Page 367 Alternative Distributor Corp a distributor of groceries Answer

BYP7-7; Page 367
Alternative Distributor Corp., a distributor of groceries and related products,
is headquartered in Medford, Massachusetts.

During a recent audit, Alternative Distributor Corp. was advised that existing internal
controls necessary for the company to develop reliable financial statements were inadequate.
The audit report stated that the current system of accounting for sales, receivables,
and cash receipts constituted a material weakness. Among other items, the report focused
on nontimely deposit of cash receipts, exposing Alternative Distributor to potential loss
or misappropriation, excessive past due accounts receivable due to lack of collection
efforts, disregard of advantages offered by vendors for prompt payment of invoices, absence
of appropriate segregation of duties by personnel consistent with appropriate control
objectives, inadequate procedures for applying accounting principles, lack of qualified
management personnel, lack of supervision by an outside board of directors, and overall
poor recordkeeping.

Instructions
(a) Identify the principles of internal control violated by Alternative Distributor
Corporation.
(b) Explain why managers of various functional areas in the company should be concerned about internal controls.

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BPY 7-7