Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Question
Chapter 14, Problem 26DQP
To determine
Identify the suitable internal control for the error or fraud.
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Students have asked these similar questions
A fraudulent sales order was prepared by an order entry clerk in an attempt to steal merchandise from an organization. This fraud would most likely be detected by:
Question 6 options:
Using pre-numbered sales orders.
Verifying that the sales order has been prepared correctly.
Requiring that all sales orders by supported by an approved customer purchase order.
Proper segregation of duties.
1. What does it mean to say that internal control has limitations and what are these limitations?
2. Provide an appropriate response based on the following scenarios.
Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented?
Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented?
3. What is petty cash and what purpose(s) does it serve?
4. What types of controls should be in place to make sure people in the office don't just take from petty cash (for their own personal use) whenever they feel like it? In your opinion, what is an appropriate amount to have in petty cash?
5. Prepare the necessary journal entries for each of the following:
(a) On March 1, issued a check to establish a petty cash fund of $1,410
(b)…
Which of the following statements is correct?
Select one:
a. Account receivable turnover is equal to net credit sales divided by average net accounts receivable.
b. Buying aged receivables from businesses and then collects the payments directly from the customers is called Allowance for uncollectible accounts.
c. Auto generated document numbers is a fraud preventive method which is more efficient than physical controls.
d. If the same people are responsible for a series of related accounting activities is called Segregation of Duties.
Chapter 14 Solutions
Auditing and Assurance Services, Student Value Edition (16th Edition)
Ch. 14 - Describe the following documents and records and...Ch. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQ
Ch. 14 - Prob. 11RQCh. 14 - Prob. 12RQCh. 14 - Prob. 13RQCh. 14 - Prob. 14RQCh. 14 - Prob. 15RQCh. 14 - Prob. 16RQCh. 14 - Prob. 17RQCh. 14 - Prob. 18RQCh. 14 - Prob. 19.3MCQCh. 14 - Prob. 19.1MCQCh. 14 - Prob. 19.2MCQCh. 14 - Prob. 20.1MCQCh. 14 - Prob. 20.2MCQCh. 14 - Prob. 20.3MCQCh. 14 - An auditor is performing substantive tests of...Ch. 14 - Prob. 21.2MCQCh. 14 - Prob. 22.1MCQCh. 14 - Prob. 22.2MCQCh. 14 - Prob. 22.3MCQCh. 14 - Prob. 23DQPCh. 14 - Prob. 24DQPCh. 14 - Prob. 25DQPCh. 14 - Prob. 26DQPCh. 14 - Prob. 27DQPCh. 14 - Prob. 28DQPCh. 14 - Prob. 29DQPCh. 14 - Prob. 30DQPCh. 14 - Prob. 31DQPCh. 14 - Prob. 32DQPCh. 14 - Prob. 33DQPCh. 14 - Prob. 34CCh. 14 - Prob. 35ICA
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Similar questions
- 1. 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_forwardA 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 ETFsarrow_forwardWhich of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? a. Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables b. Claim received from customers for goods returned may be intentionally recorded in other customer’s accounts. c. Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash d. The failure to prepare shipping documents may cause an overstatement of inventory balancesarrow_forward
- 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…arrow_forwardProvide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented?arrow_forwardSadaf Oman Co. is using internal control procedures to mitigate the risks to which it is exposed. Listed below are some internal control procedures applicable to Sadaf Oman Co's revenues and receivable system. Match the most appropriate one of the following risks mitigated to the correct internal control procedure stated below. Risks mitigated: (A) Sales staff misappropriate sales receipts then write off bad debts in the general ledger (B) Sales are made to customers who cannot pay (C) Sales are not made to existing customers (D) Sales staff do not communicate with the accounts staff regularly, so the debt uncollected at the end of the period are written off in the ledger by the accounts staff (E) Customer refuses to pay for goods allegedly not received (F) Customer orders are not being fulfilled. (G) Revenues on books are overstated and exceed actual revenues in bank (H) Posting a sale that is beyond the credit limit of the customers ) Company employees steal collections (U) Without…arrow_forward
- 1. A threat in the expenditure cycle that involves unauthorized individuals making purchases is known as: A. Unauthorized access B. Fraudulent disbursements C. Data breaches D. Inventory theft 2. What is the first step in the expenditure cycle? A. Placing the purchase order B. Recording the transaction C. Authorizing the purchase D. Receiving goods or services 3. Which of the following is not a step in the expenditure cycle? A. Approving the purchase requisition B. Collecting cash from customers C. Receiving goods or services D. Recording the transaction in the general ledgerarrow_forwardRequired: Which internal control(s) would you recommend to prevent the following situations from occurring? Situation a. Authorization of a credit memo for a customer's account (on receivables) when the goods were never actually returned. b. Theft of funds by the cashier, who cashed several checks and did not record their receipt. c. Inventory stolen by receiving dock personnel. The receiving clerk claimed the inventory was sent to the warehouse, but the warehouse clerk did not record properly. d. Writing off a customer's accounts receivable balances as uncollectible in order to conceal the theft of subsequent cash collections. e. Billing customers for the quantity ordered when the quantity shipped was actually less due to back- ordering of some items. Answerarrow_forward1. Match the description on the left with the type of theft on the right using Excel spreadsheet. See notes below. 1. Most common type of noncash theft 2. Goods shipped to an accomplice 3. Altering physical inventory counts to cover theft 4. Goods are stolen, then a receiving document is created showing fewer goods received a. Fraudulent write-off b. Unconcealed larceny c. Falsified shipping or receiving report d. Fraudulent shipmentarrow_forward
- The fraud triangle asserts that the following three factors must exist for a person to commit fraud.A. Opportunity B. Pressure C. RationalizationIdentify the fraud risk factor (A, B, or C) in each of the following situations. A worker sees other employees regularly take inventory for personal use.arrow_forward1. 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 2. A threat in the expenditure cycle that involves unauthorized individuals making purchases is known as: Unauthorized access Fraudulent disbursements Data breaches Inventory theft 3.arrow_forwardThe fraud triangle asserts that the following three factors must exist for a person to commit fraud.A. Opportunity B. Pressure C. RationalizationIdentify the fraud risk factor (A, B, or C) in each of the following situations. No one matches the cash in the register to receipts when shifts end.arrow_forward
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