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ACCT 421 Gleim Chapter 6
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Questions in this quiz (15)
1The internal control objectives of the revenue cycle include all of the following EXCEPT
- ARevenue cycle transactions are properly executed.
- BAppropriate goods are ordered so that sales can be made.
- CTransactions relating to revenue are properly recorded.
- DCustody over assets resulting from the revenue cycle is properly maintained.
2Which of the following are NOT directly involved in the revenue cycle?
- ASales manager and the credit manager.
- BChief financial officer and controller.
- CBilling clerk.
- DReceiving department clerk.
3Which of the following employees should report to the chief financial officer?
- AInternal auditor.
- BSales clerk.
- CBookkeeper.
- DCredit manager.
4An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of
- AValuation.
- BCompleteness.
- COccurrence.
- DRights and obligations.
5Which of the following most likely would be the result of ineffective control in the revenue cycle?
- AFinal authorization of credit memos by personnel in the sales department could permit an employee defalcation scheme.
- BFictitious transactions could be recorded, causing an understatement of revenues and an overstatement of receivables.
- CFraud in recording transactions in the subsidiary accounts could result in delay in goods shipped.
- DOmission of shipping documents could go undetected, causing an understatement of inventory.
6Which of the following credit approval procedures would be the basis for developing a deficiency finding for a wholesaler?
- ATrade-credit standards are reviewed and approved by the finance committee of the board of directors.
- BCustomers not meeting trade-credit standards are shipped merchandise on a cash-on-delivery (C.O.D.) basis only.
- CSales people are responsible for evaluating and monitoring the financial condition of prospective and continuing customers.
- DAn authorized signature from the credit department denoting approval of the customer's credit is to appear on all credit-sales orders.
7Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate internal control over the invoicing function allows goods to be shipped that are not invoiced. The inadequate controls could cause an
- AUnderstatement of revenues, receivables, and inventory.
- BOverstatement of revenues and receivables and an understatement of inventory.
- CUnderstatement of revenues and receivables and an overstatement of inventory.
- DOverstatement of revenues, receivables, and inventory.
8Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded?
- AThe billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances.
- BThe accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly.
- CThe accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences they report.
- DThe billing department supervisor matches pre-numbered shipping documents with entries in the sales journal.
9An auditor observes the mailing of monthly statements to a client's customers and reviews evidence of follow-up on errors reported by the customers. This test of controls most likely is performed to support management's financial statement assertion(s) of
- AClassification/understandability AND existence.
- BClassification/understandability but NOT existence.
- CExistence but NOT classification/understandability.
- DNeither classification/understandability NOR existence.
10One of two office clerks in a small company prepares a sales invoice for $4,300; however, the invoice is incorrectly entered by the bookkeeper in the general ledger and the accounts receivable subsidiary ledger as $3,400. The customer subsequently remits $3,400, the amount on the monthly statement. Assuming there are only three employees in the department, the most effective control to prevent this type of error is
- AAssigning the second office clerk to independently check the sales invoice prices, discounts, extensions, and footings, and to account for the invoice serial number.
- BRequiring that monthly statements be prepared by the bookkeeper and verified by one of the other office clerks prior to mailing.
- CUsing predetermined totals to control posting routines.
- DRequiring the bookkeeper to perform periodic reconciliations of the accounts receivable subsidiary ledger and the general ledger.
11Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?
- AUnderstating the sales journal.
- BOverstating the accounts receivable control account.
- COverstating the accounts receivable subsidiary ledger.
- DUnderstating the cash receipts journal.
12Which of the following would be the best protection for a company that wishes to prevent the lapping of trade accounts receivable?
- ASegregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail.
- BSegregate duties so that no employee has access to both checks from customers and currency from daily cash receipts.
- CHave customers send payments directly to the company's depository bank.
- DRequest that customers' payment checks be made payable to the company and addressed to the CFO.
13Upon receipt of customers' checks in the mail room, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the
- AInternal auditor to investigate the listing for unusual transactions.
- BCFO to compare the listing with the monthly bank statement.
- CAccounts receivable bookkeeper to update the subsidiary accounts receivable records.
- DEntity's bank to compare the listing with the cashier's deposit slip.
14Which of the following internal control activities most likely would deter lapping of collections from customers?
- AIndependent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries.
- BAuthorization of write-offs of uncollectible accounts by a supervisor independent of credit approval.
- CSeparation of duties between receiving cash and posting the accounts receivable ledger.
- DSupervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.
15For the purpose of effective internal control, postdated checks received from customers should be
- ARestrictively endorsed.
- BReturned to customer.
- CRecorded as a cash sale.
- DPlaced in the joint custody of two officers.
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- Quiz on ACCT 421 Gleim Chapter 6, created by dykstra_a on 18/11/2015.
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- dykstra_a
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