Revenue/Receipts-Cash

Question 1

Internal Control Objectives—The objectives of internal controls in this area are to provide reasonable assurance that:

Answer 1

1) Access to cash receipts records and accounts receivable records is limited to authorized personnel.
2) Detailed cash and account balance records are reconciled with control accounts and bank statements at least monthly.
3) All cash receipts are correctly recorded in the period received.

Question 2

Immediately upon receipt of cash, a responsible employee should

Answer 2

Prepare a remittance listing

Question 3

Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and

Answer 3

deters dishonesty by making employees aware that insurance companies may investigate and prosecute dishonest acts.

Question 4

Upon receipt of customers’ checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the

Answer 4

Accounts receivable bookkeeper to update the subsidiary accounts receivable records

Question 5

An auditor would be most likely to limit substantive audit tests of sales transactions when control risk is assessed as low for the existence or occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting

Answer 5

Cash receipts and accounts receivable

Question 6

Sound internal control procedures dictate that, immediately upon receiving checks from customers by mail, a responsible employee should

Answer 6

Prepare a duplicate listing of checks received

Question 7

Which of the following internal control procedures would most likely deter lapping of collections from customers?

Answer 7

Lapping occurs when a remittance received from one customer is stolen and the shortage is hidden by crediting the first customer’s account with the cash received from a second customer. Lapping is best prevented by separating custody from recording. The person responsible for receiving cash should not also be responsible for posting the amounts to the accounts receivable subsidiary ledger.

Question 8

Which of the following internal controls would be most likely to reduce the risk of diversion of customer receipts by an entity’s employees?

Answer 8

A bank lockbox system

Question 9

An auditor would consider a cashier’s job description to contain compatible duties if the cashier receives remittances from the mailroom and also prepares the

Answer 9

Daily deposit slip