Statement 1: In the absence of any errors or reconciling item, or when transactions between the home office and the branch are properly recorded, it is expected that the reciprocal account, home office and branch accounts, are of the same amount. Statement 2: Excessive freight costs for interbranch transfers should be absorbed as an expense by the office directing the transfers, because it represents management mistakes or inefficiencies. O False, False O True, False O True, True O False, True

Statement 1: In the absence of any errors or reconciling item, or when transactions between the home office and the branch are properly recorded, it is expected that the reciprocal account, home office and branch accounts, are of the same amount. Statement 2: Excessive freight costs for interbranch transfers should be absorbed as an expense by the office directing the transfers, because it represents management mistakes or inefficiencies. O False, False O True, False O True, True O False, True

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 29RQSC

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Authorization of transactions is considered a key control in most organizations. Authorizations should not be made by individuals who have incompatible functions. For each transaction (listed as A. through I. below), indicate the individual or function (e.g., the head of a particular department) that should have the ability to authorize that transaction. Briefly provide rationale for your answer. A. Writing off old accounts receivable. B. Committing the organization to acquire another company that is half the size of the existing company. C. Paying an employee for overtime. D. Shipping goods on account to a new customer. E. Purchasing goods from a new vendor. F. Temporarily investing funds in common stock investments instead of money market funds. G. Purchasing a new line of manufacturing equipment to remodel a production line at one of the company’s major divisions (the purchase represents a major new investment for the organization). H. Replacing an older machine at one of the…
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