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1. A key internal control in the sales and collect...




1. A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that a)Cash receipts recorded in the cash receipts journal are reasonable b)Cash receipts are properly classified c)Recorded cash receipts result from legitimate transactions d)Existing cash receipts are recorded 2. An auditor tests a company?s policy of obtaining credit approval before shipping goods to customers in support of management?s financial statement assertion of a)Valuation or allocation b)Completeness c)Existence or occurrence d)Rights and obligations 3. Which of the following internal controls would most likely reduce write-offs of un-collectible accounts receivable? a)Employees responsible for authorizing sales and charge-offs of uncollectible accounts receivable are denied access to cash. b)Shipping documents and sales invoices are matched by an employee who does not have the authority to charge off uncollectible accounts receivable. c)Employees involved in the credit-granting function are separated from the sales function d)Accounts receivable master file records are reconciled to the control account by an employee who is not involved in the credit-granting function 4. A manufacturing company received a substantial sales return in the last month of the year, but the credit memorandum for the return was not prepared until after the auditors had completed the field work. The returned merchandise was included in the physical inventory. What control should have prevented the misstatement? a)Aged trial balance of accounts receivable is prepared. b)Credit memoranda are pre-numbered and all numbers are accounted for. c)A reconciliation of the trial balance of customer?s accounts with the general ledger control is prepared periodically. d)Receiving reports are prepared for all materials received and such reports are accounted for on a regular basis. 5. The sales manger credited a salesman, Jack Smith, with sales that were actually ?house account? sales. Later Smith divided his excess sales commissions with the sales manager. What control should have prevented the misstatement? a)The summary sales entries are checked periodically by persons independent of sales functions. b)Sales orders are reviewed and approved by persons independent of the sales department. c)The internal auditor compares the sales commission statements with the cash disbursements records. d)Sales orders are pre-numbered, and all are accounted for.


Paper#12837 | Written in 18-Jul-2015

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