Question

Select one internal control from the list provided that would prevent or detect the error or fraud described. Controls may be used twice in this exercise or not at all.

1. ___ Invoices for goods sold are posted to the wrong account.

2. ___ Goods ordered by customers are shipped, but are not billed to anyone.

3. ___ Goods are removed from inventory for unauthorized orders.

4. ___ Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious transactions.

5. ___ Customers’ checks are received for less than the full account balance, but the customers’ full account balances are credited.

6. ___ Customer checks are stolen before being forwarded to the cashier for deposit.

7. ___ Customer checks are stolen after being forwarded to the cashier for deposit.

8. ___ False transactions granting credit for sales returns are recorded.

Answer Bank

A. Shipping clerks compare goods received from the warehouse with the details on the shipping documents.

B. Approved sales invoices are required for goods to be released from the warehouse.

C. Monthly statements are mailed to all customers.

D. Shipping clerks compare goods received from the warehouse with approved sales invoices.

E. Daily Sales Journal totals are compared to a control total of invoices.

F. Shipping documents are compared with sales invoices when goods are shipped.

G. Sales invoices are compared with the master price file.

H. Control amounts posted to the amounts receivable ledger are compared with control totals for invoices.

I. Sales invoices are compared with shipping documents and approved customer orders before invoices are mailed.

J. Goods returned for credit are approved by the supervisor of the sales department.

K. Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slip.

L. Pre-numbered credit memos are used for granting credit for goods returned.

Answer 1