3 - TBS Flashcards
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Invoices for goods sold are posted to incorrect customer accounts.
INTERNAL CONTROL PROCEDURE: Monthly statements are mailed to all customers with outstanding balances.
With monthly statements mailed to all customers with outstanding balances, an incorrect posting of an invoice to
a customer’s account is likely to be noticed by the customer and brought to the appropriate party’s attention.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Goods ordered by customers are shipped, but are not billed to anyone.
INTERNAL CONTROL PROCEDURE:
Shipping documents are compared with sales invoices when goods are shipped.
By starting with the population of shipping documents and comparing them to sales invoices when goods are shipped, any good shipped that are not billed will result in shipping documents that will not be able to be matched to an invoice.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Invoices are sent for shipped goods, but are not recorded in the sales journal.
INTERNAL CONTROL PROCEDURE:
Daily sales summaries are compared with control totals of invoices.
To determine if all sales invoices are recorded in the sales journal, the auditor can check for missing numbers if the sales invoices are prenumbered or can work from a population of all sales invoices and trace them to the sales journal. In addition, the auditor can compare a summary of daily sales to the amount recorded for that day in the sales journal to determine if there are unrecorded invoices.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Invoices are sent for shipped goods and are recorded in the sales journal, but are not posted to any customer account.
INTERNAL CONTROL PROCEDURE:
Control amounts posted to the accounts receivable ledger are compared with control totals of invoices.
By comparing control totals of invoices to amounts posted to the accounts receivable ledger, it can be ascertained that all invoices are posted to someone’s account.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Credit sales are made to individuals with unsatisfactory credit ratings.
INTERNAL CONTROL PROCEDURE:
Customer orders are compared with an approved customer list.
To avoid making sales to individuals with unsatisfactory credit ratings, the company can require that all credit sales be to customers who have already been approved and are listed on an approved list or require authorization from an appropriate party with credit granting authority.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Goods are removed from inventory for unauthorized orders
INTERNAL CONTROL PROCEDURE:
Approved sales orders are required for goods to be released from the warehouse.
Removal of goods from inventory for unauthorized orders can be prevented if the custodian of goods in the warehouse is not allowed to release the goods without an approved sales order.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Goods shipped to customers do not agree with goods ordered by customers.
INTERNAL CONTROL PROCEDURE:
Shipping clerks compare goods received from the warehouse with approved sales
orders.
Shipping nonconforming goods to customers can be avoided if shipping clerks are required to compare goods that are about to be shipped to the customer’s sales order.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions.
INTERNAL CONTROL PROCEDURE:
Sales invoices are compared with shipping documents and approved customer orders before invoices are mailed.
Recording of invoices for fictitious transactions can be detected by tracing recorded transactions from the sales journal to the underlying shipping documents to make certain
that the invoices represent goods that were actually shipped.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Customers’ checks are received for less than the customers’ full account balances, but the customers’ full account balances are credited.
INTERNAL CONTROL PROCEDURE:
Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.
By comparing total amounts posted to the accounts receivable ledger to validated bank deposit slips, the auditor can determine that amounts posted to the accounts were actually deposited and did not represent amounts greater than what was actually received.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Customers’ checks are misappropriated before being forwarded to the cashier for deposit
INTERNAL CONTROL PROCEDURE:
Monthly statements are mailed to all customers with outstanding balances.
If customers’ checks are misappropriated before being forwarded to the cashier for deposit, they will not be entered as reductions to the customers’ accounts. As a result, when monthly statements are mailed to the customers, they will detect the fact that their balance is overstated.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Customers’ checks are credited to incorrect customer accounts.
INTERNAL CONTROL PROCEDURE:
Monthly statements are mailed to all customers with outstanding balances.
If customers’ checks are credited
to incorrect customers’ accounts, those making the payment will notice that their balance is overstated when they
receive the monthly statements mailed to all customers with outstanding balances.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Different customer accounts are each credited for the same cash receipt
INTERNAL CONTROL PROCEDURE:
Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.
If different customer accounts are each credited for the same cash receipt, the total credits posted to the accounts receivable ledger will exceed the amount deposited which can be detected by
comparing the total amount posted to the validated deposit slip
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Customers’ checks are properly credited to customer accounts and are properly deposited, but errors are made in recording receipts in the cash receipts journal.
INTERNAL CONTROL PROCEDURE:
An employee, other than the bookkeeper, periodically prepares a bank reconciliation.
If errors are made in recording receipts in the cash receipts journal, the bank account will not reconcile. These errors can be detectedif someone other than the person making the errors reconciles the bank account.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Customers’ checks are misappropriated after being forwarded to the cashier for deposit
INTERNAL CONTROL PROCEDURE:
Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.
If customer checks are misappropriated after being forwarded to the cashier for deposit, the amount deposited will be lower than the amount credited to the customer accounts and can be detected by comparing the two amounts.
SELECT INTERNAL CONTROL PROCEDURE FOR THE FOLLOWING POSSIBLE ERROR OR IRREGULARITY:
Invalid transactions granting credit for sales returns are recorded.
INTERNAL CONTROL PROCEDURE:
Goods returned for credit are approved by the supervisor of the sales department.
Granting credit for invalid sales returns can be avoided if the supervisor of the sales department approves all returns of goods for credit.
