8) During the physical count of inventory of the retail grocery store one counter wrote down the wrong description of several products and miscounted the quantity. A control that could have prevented this error was A) adequate documents B) separation of duties C) independent verification D) proper authorization

8) During the physical count of inventory of the retail grocery store one counter wrote down the wrong description of several products and miscounted the quantity. A control that could have prevented this error was A) adequate documents B) separation of duties C) independent verification D) proper authorization

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter7: Accounting Information Systems

Section: Chapter Questions

Problem 10MC: The company just took a physical count of inventory and found $75 worth of inventory was unaccounted...

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The company just took a physical count of inventory and found $75 worth of inventory was unaccounted for. It was either stolen or damaged. Which journal would the company use to record the correction of the error in inventory? A. sales journal B. purchases journal C. cash receipts journal D. cash disbursements journal E. general journal
8) During the physical count of inventory of the retail grocery store one counter wrote down the wrong description of several products and miscounted the quantity. A control that could have prevented this error was A) adequate documents B) separation of duties C) independent verification D) proper authorization 9) In the previous problem, the Transaction Related Audit Objective affected by this error is A) occurrence B) completeness C) existence D) accuracy
As the auditor of Sample Limited you note the following matters relating to the internal control of its sales system. i) The sales department accepts order without first checking the inventory level with the warchouse, ii) Goods are dispatched to customers without recording customer's signatures as proof of receipt of goods. iii) Orders of goods placed by customers are properly recorded but they are not forwarded timely to the dispatch department for fulfilling the order. For each of the above deficiencies, identify the possible impact on the company's operation and recommend a control to address it. Explain why an auditor cannot perform only test of control in an audit.
What internal control procedure(s) would provide protection against the following threats? a. Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records.b. Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system .c. Making a credit sale to a customer who is already four months behind in making payments on his account. d. Authorizing a credit memo for a sales return when the goods were never actually returned. e. Writing off a customer’s accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer. f. Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items .g. Lost sales because of stockouts of several products for which the computer records indicated there was adequate quantity on hand. h. A sales clerk sold a $7,000 wide-screen TV…
Which of the following is NOT an independent verification control?a. The shipping department verifies that the goods sent from the warehouse are correct in type and quantity.b. General ledger clerks reconcile journal vouchers that were independently prepared in various departments.c. The use of prenumbered sales orders.d. The billing department reconciles the shipping notice with the sales invoice to ensure that customers are billed for only the quantities shipped.
1. Please provide the type of audit procedures that was performed in the following actions or procedures: Inquire of management whether they have properly identified obsolete inventory as at the balance sheet date ___________ Re-compute the unit sales price multiplied by the number of units for a sample of duplicate sales invoices, and compare the totals to the client’s calculations _____________________
Which of the following procedures would best prevent or detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?a. Maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record.b. Have an independent accounting firm prepare an internal control report on the effectiveness of the controls over inventory.c. Have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory records.d. Require a manager’s signature for the removal of any inventory item with a value of morethan $50.
If reconciliation as a control is properly implemented at Company, Inc. it would detect all of the following errors, except; A) Transactions at Company, Inc. were appropriately posted to individual subsidiary accounts but because of a computer malfunction, some of the transactions were not posted to the master account B) Company, Inc. has experienced inventory shrinkage (theft) that has caused the perpetual inventory records to be overstated C) Three shipments at Company, Inc were never invoiced because employees in the shipping room colluded with a shipper to deliver the goods to their own private companies for resale and they never recorded the shipments on any documents
Which, if any, of the following situations represent improper segregation of functions?a. The billing department prepares the customers’ invoices, and the accounts receivable department posts to the customers’ accounts.b. The sales department approves sales credit memos as the result of product returns, and subsequent adjustments to the customer accounts are performed by the accounts receivable department.c. The shipping department ships goods that have been retrieved from stock by warehouse personnel.d. The general accounting department posts to the general ledger accounts after receiving journal vouchers that are prepared by the billing department.
Which, if any, of the following situations represent improper segregation of functions?A. The billing department prepares the customers ‘invoices, and the AR department posts to thecustomers’ accounts.B The sales department approves sales credit memos as the result of product returns, and subsequentadjustments to the customer accounts are performed by the AR department.C The shipping department ships goods that have been retrieved from stock by warehouse personnel.D. The general accounting department posts to the general ledger accounts after receiving journalvouchers that are prepared by the billing department.
1. Which of the following is a control procedure to address the threat of purchasing goods or services at inflated prices? A. Requiring multiple approvals for purchases B. Performing regular physical inventory counts C. Conducting vendor audits D. Implementing encryption for sensitive data 2. Which of the following is not a common error in the expenditure cycle? A. Recording the wrong purchase order number B. Recording the wrong vendor name for goods received C. Recording the wrong quantity of goods received D. Recording the wrong price for goods received 3. The primary objective of internal controls in the expenditure cycle is to: A. Ensure the accuracy and completeness of financial transactions B. Streamline the procurement process C. Minimize the cost of purchases D. Increase the speed of payment processing
Upon reciept of requisition, the stores manager initiates a three part purchase order. To copies go to the vendor and one copy stays in the stores file. Upon reciept of the goods, the stores manager matches the purchase order with the invoice and forwards them to accounts payable for payments. which of the following statement best describe the internal control over purchasing? a. adequate the internal control exists. b. Inadequate separation of duties exists. c. Inadequate control over accounts payable exists. d. Inadequate control over the requisition pricess exists.