Which of the following control procedures will likely prevent the concealment of a cash shortage that was perpetrated by improperly writing off a trade account receivable?
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MODULE 10 TESTS OF CONTROLS AND SUBSTANTIVE PROCEDURES REVENUE AND RECEIPTS CYCLE Test of Controls 1.Which of the following business functions is associated with the revenue/receipt cycle? A.Obligations are paid to vendors and employees. B.Resources are distributed to outsiders in exchange for promises of future payments. C. Resources are used, held, or transformed. D.Capital funds are received from investors and creditors. 2.Which of the following is not a common activity in the revenue/receipt cycle? A.Order entry B.Receiving C.Inventory control D.cash collection 3.The cash account is involved in which cycle? A.Revenue and collection. B. Acquisition and expenditure. C.Production and conversion. D.All of the given choices. 4.Which of the following is an appropriate audit procedure to test cancelled checks for authorized signatures? 423 63 CHAPTER9 MULTIPLECHOICE c1.Aftertheauditorhaspreparedaflowchartofinternalcontrolforsalesandcashreceipts transactionsandevaluatedthe designofthesystem,theauditorwouldperformtestsofcontrols onallcontrolprocedures a.Documentedintheflowchart. b.Consideredtobedeficiencies thatmightallowerrorstoentertheaccountingsystem. c.Consideredtobestrengthsthattheauditorplanstorelyoninassessingcontrol risk. d.Thatwouldaidinpreventingirregularities.(AICPAADAPTED) b2.Todeterminewhetherinternalcontroleffectivelyminimizederrorsoffailureto billacustomer forashipment,theauditorwouldselectasampleoftransactionsfromthepopulationrepresented bythe a.Customerorderfile. b. Shippingrecordsfile. c.Subsidiarycustomeraccountsledger. d.Salesinvoice.(AICPAADAPTED) a3.Whichofthefollowingwouldtheauditorconsidertobeanincompatible operationifthecashier receivesremittancesfromthemailroom? a.Thecashierpoststhereceiptstotheaccountsreceivablesubsidiaryledger. b.The cashiermakesthedailydepositatalocalbank. c.Thecashierpreparesthedailydeposit. d.Thecashierendorsesthechecks.(AICPAADAPTED) c4.Theleast crucialelementofcontrolovercashis a.Separationofcashrecordkeepingfromcustodyofcash. b.Preparationofthemonthlybankreconciliation. c.Batch processingofchecks. d.Separationofcashreceiptsfromcashdisbursements.(AICPAADAPTED) b5.Whichofthefollowingisnotauniversalruleforachieving controlovercash? a.Separatethecash-handlingandrecord-keepingfunctions. b.Decentralizethereceivingofcashasmuchaspossible. c.Depositeachday'scash receiptsbytheendoftheday. d.Havebankreconciliationsperformedbyemployeeswhodonothandlecash. (AICPAADAPTED) d6.Atwhichpoint inanordinarysalestransactionofawholesalingbusinessisalackofspecific authorizationofleastconcerntotheauditorintheconductofanaudit? a. Grantingofcredit. b.Shipmentofgoods. c.Determinationofdiscounts. d.Sellingofgoodsforcash.(AICPAADAPTED) Which of the following control procedures will likely prevent the concealment of a cash shortage that was?A separate ledger. Which of the following controls will most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable? Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.
Which of the following controls will most likely prevent the concealment of a cash shortage resulting from the improper write off of a trade account receivable?D. Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected. No, because the cashier is the one person most likely to want to conceal cash shortages.
Which of the following controls most likely would reduce the risk of concealment of customer receipts?Which of the following internal controls most likely would reduce the risk of diversion of customer receipts by an entity's employees? Explanation: A lockbox system is the best means of preventing fraud of cash by employees because they will never have direct access to cash receipts.
Which of the following would be the best protection for a company that wishes to prevent He lapping of trade accounts receivable?Which of the following would be the best protection for a company that wishes to prevent the "lapping" of trade accounts receivable? Have customers send payments directly to the company's depository bank.
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