Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 11, Problem 3RQ
To determine
Explain the control that could be established to guard against such errors.
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Students have asked these similar questions
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…
What internal control or procedure(s) would provide protection against the following threats?
A purchasing agent orders materials from a supplier that he partially owns
Receiving-department steal inventory and then claim the inventory was sent to the warehouse.
An unordered supply of laser printer paper delivered to the office is accepted and paid for because the “price is right.” After all of the laser printers are jammed, however, it becomes obvious that the “bargain” paper is of inferior quality.
The company fails to take advantage of a 1% discount for promptly paying a vendor invoice
Inventory records show that an adequate supply of copy paper should be in stock, but none is available on the supply shelf
A serious exposure in the revenue cycle is customer dissatisfaction. What is the related threat and applicable control procedure that address this exposure?
A. failure to bill; separation of billing and shipping functions
B. failure to bill; bar-codes and RFID technology
C. billing errors; reconciliation of shipping documents to sales order
D. theft of cash; using ETFs
Chapter 11 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 11 - Explain the difference between a customers order...Ch. 11 - Prob. 2RQCh. 11 - Prob. 3RQCh. 11 - State briefly the objective of the billing...Ch. 11 - Prob. 5RQCh. 11 - Prob. 6RQCh. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - Prob. 10RQ
Ch. 11 - Prob. 11RQCh. 11 - Prob. 12RQCh. 11 - Prob. 13RQCh. 11 - Prob. 14RQCh. 11 - Prob. 15RQCh. 11 - Prob. 16RQCh. 11 - Prob. 17RQCh. 11 - Prob. 18RQCh. 11 - Prob. 19RQCh. 11 - Prob. 20RQCh. 11 - Prob. 21RQCh. 11 - Prob. 22RQCh. 11 - Give an example of a type of receivable...Ch. 11 - Prob. 24RQCh. 11 - Prob. 25QRACh. 11 - Prob. 26QRACh. 11 - Prob. 27QRACh. 11 - Prob. 28QRACh. 11 - Prob. 29QRACh. 11 - Prob. 30QRACh. 11 - Prob. 31QRACh. 11 - Prob. 32QRACh. 11 - Prob. 33QRACh. 11 - Prob. 34QRACh. 11 - Prob. 35QRACh. 11 - Prob. 36AOQCh. 11 - Which of the following would provide the most...Ch. 11 - Prob. 36COQCh. 11 - Prob. 36DOQCh. 11 - Prob. 36EOQCh. 11 - Under SEC rules, which of the following is not...Ch. 11 - Prob. 36GOQCh. 11 - Prob. 36HOQCh. 11 - Prob. 36IOQCh. 11 - Prob. 36JOQCh. 11 - Prob. 36KOQCh. 11 - Prob. 36LOQCh. 11 - Prob. 37OQCh. 11 - Prob. 38OQCh. 11 - An auditors working papers include the following...Ch. 11 - Prob. 40OQCh. 11 - Prob. 41OQCh. 11 - Prob. 42OQCh. 11 - Prob. 43OQCh. 11 - Prob. 44PCh. 11 - Prob. 45PCh. 11 - Prob. 46PCh. 11 - Prob. 47PCh. 11 - The July 31, 20X0, general ledger trial balance of...Ch. 11 - Prob. 49ITCCh. 11 - Prob. 50ECCh. 11 - Prob. 51EC
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Similar questions
- 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.arrow_forwardWhich, 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.arrow_forwardwhich, if any of the following situations represents improper segregation of functions? Explain your answer. a. the billing department prepares the customers' invoices and records the sale in the sales journal b. The mailroom clerk opens a cash receipt envelopes from customers and also prepared the remittance risk c. Accounting clerk receives journal vouchers from various departments and also posts to the GL accounts d. The sales department approves sales credit memos as the result of product returns and forwards these to the AR department, which adjusts the customer accounts to reflect the return.arrow_forward
- Which of the following is not generally an internal control activity? a.Physically counting inventory in a perpetual inventory system b.Establishing clear lines of authority to carry out specific tasks c.Reducing the cost of hiring seasonal employees d.Limiting access to computerized accounting recordsarrow_forwardThe kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent financial favors (cash, presents, football tickets, and so on). This activity can result in ordersbeing placed with vendors that supply inferior products or charge excessive prices.Required;i) Describe two preventive controls that an organization can employ to deal withkickbacks fraud ii) Describe two detective controls that an organization can employ to deal with kickbacksfraud iii) Describe two corrective controls that an organization can employ to deal with kickbacks fraudarrow_forward34.Which of the following would be a red flag that internal auditors should look at for the possibility of inventory fraud?I. The controller has assumed responsibility for approving all payments to certain vendors.II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.III. Sales commissions are not consistent with the organization's increased levels of sales.IV. Payments to vendors are supported by copies of receiving memos, rather than originals. Group of answer choices I, II, and IV only I, II, III, and IV I, III, and IV only II and III only I and II onlyarrow_forward
- The kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent financial favors (cash, presents, football tickets, and so on). This activity can result in orders being placed with vendors that supply inferior products or charge excessive prices. Describe the controls that an organization can employ to deal with kickbacks. Classify each control as preventive, detective, or corrective.arrow_forwardAs 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.arrow_forwardThe company XYZ suffers from numerous weaknesses in its internal control system. For each the below situations, you are required to identify the anomaly/risk related to this system and propose eventual solutions. The financial department issues one copy of the sales bill that is shipped to the customer with the company The inventory custodian is the person who deliver the merchandise to the The person who keep the checks (issued and received) is the same who have access to the company accounting system. A has now 9 years experience in the company. He is responsible to keep cash and checks. Since he joining XYZ , he has not claim any vacation. The financial manager prepares the checks for the company suppliers and receive the merchandises ordered by the The company XYZ has recently installed an ERP system to manage all its activities . Different staff have access to this system. Mr X is working…arrow_forward
- A purchasing agent for a large hardware retailer hassole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent’s brother- in-law, which charges above-market prices for its products. The agent’s relationship with the supplier is unknown to his employer. What type of Fraud is this? What controls can be implemented to prevent and detect this fraud?arrow_forward1. A threat to the expenditure cycle that involves an employee creating and approving fictitious purchase orders is known as: A. Inventory theft B. Unauthorized access C. Check tampering D. Billing schemes 2. Purchase orders are used to initiate a payment in the disbursement cycle. True or False 3.Vendor audits are conducted to address the threat of unauthorized access in the disbursement cycle. True or falsearrow_forwardAs 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 warehouse. 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. a) For each of the above deficiencies, identify the possible impact on the company's operation and recommend a control to address it. b) Explain why an auditor cannot perform only test of control in an audit.arrow_forward
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