Chapter 6 Flashcards
Internal Control- Sales Receivables- Cash Receipts Cycle
What cycle is the receiving department clerk involved in?
purchases payables cycle.
Clerk counts the goods, and prepares receiving reports that provide partial authorization for invoice payment
If cash receipts on sale accounts have been misappropriated, what would conceal it so that it would not be detected by the auditor?
Understating the sales journal.
Not recording sales on account in the books of the original entry is the most effective way to conceal theft of cash receipts.
for effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve
Write-offs of customer accounts
what is lapping?
delayed recording of cash receipts to cover cash shortage.
What can indicate source document fraud?
The same invoice number appearing on different invoices.
Each invoice should have its own unique invoice number.
What does a bank lockbox system do?
Assures that cash receipts are not stolen by mail clerks or other employees. This system provides for customer payments to be sent to a post office box and collected directly by the bank.
Symbol E on the flow chart symbol indicates?
Magnetic disk storage.
Which of the following controls would be most effective offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write offs?
Employees involved in the credit granting function are separated from the sales function.
Salespeople should be responsible for generating sales and providing service to customers.
What may perpetrate fraud due to lack of internal control?
inappropriate segregation of duties, and responsibility, inadequate supervision, or deficient authorization, may result in the ability of employees to perpetrate fraud.
In retail cash sales, which of the following controls is normally absent?
Separation of functions.
In the usual retail cash sales situation, the sales clerk authorizes and records the transactions and take custody of the assets.
Written off accounts receivable should be transferred where?
To a separate ledger.
What should the sales department be responsible for?
Approval of the return of defective merchandise.
Defective merchandise returned by customers initially should be presented to ?
The receiving clerk.
Receiving reports should be prepared for all items received.
Why would online processing system have an advantage over batch processing system?
Online processing system can handle transactions as they are entered because of its direct connection to a computer network.
Thus, shipment may be initiated immediately as they are received.
Batch processing is the accumulation and grouping of transactions for processing on a delayed basis.
What does the detective control “ Line control count” do?
identify undesirable events as they occur. A line control count counts individual line items on documents.
These counts are compared to predetermined line control counts for each document to detect missing lines.
