Reference no: EM132538454

Question -

(A) Mara Limited produced wipers for motor vehicle. It had 120 workers in the production department. The production manager kept all the employment contracts and documents of the workers. The workers were responsible to record their working hours in their weekly timecards.

Every Friday afternoon, the production manager would collect all the timecards and pass them to the accounting department for preparing the payroll report. The accountant would prepare the cheques based on the payroll report. After the treasurer signed the cheques, he would pass the cheques to the production manager for distribution to the workers of the production department.

Evaluate the main issues of internal control in the above situation and suggest ways for improvement.

(B) In Year 2017, Rumi Limited used the double-declining balance method to calculate depreciation expense for its machine. The director of Rumi Limited questioned about the amount of depreciation expense of 2017. He suggested to change the depreciation method in 2018 to reflect better performance of the company.

Discuss which accounting principles would be violated and state the implications and consequences if Rumi Limited changed the depreciation method in 2018 as suggested by the director.