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An auditor would consider a cashier’s job description to contain compatible duties if the cashier receives remittances from the mail room and also prepares the

Daily deposit slip. Preparing the bank deposit slip is a part of the custodial function, which is the primary responsibility of a cashier. The cashier is an assistant to the CFO and thus performs an asset custody function. The preparation of a bank deposit slip is an integral part of the custodial function, along with the depositing of remittances daily at a local bank.


Sound internal control principles dictate that, immediately upon receiving checks from customers by mail, a responsible employee should

Prepare a duplicate listing of checks received. The mail room receives all customer receipts, opens the mail, separates the checks from the remittance advices, and prepares a daily listing of checks received. This daily remittance list ordinarily is prepared in duplicate.


An auditor tests an entity’s policy of obtaining credit approval before shipping goods to customers in support of management’s financial statement assertion of

Valuation. The proper approval of credit provides assurance that the account receivable is collectible. Thus, it is related to the valuation assertion that balances are reported at appropriate amounts, e.g., accounts receivable at net realizable value.


A credit manager reports to the CFO why?

The CFO’s primary responsibility is to safeguard assets. Although credit approval is an authorization process, assets are lost if credit is improperly granted. Thus, the credit manager should be responsible to one who has no vested interest in the granting of credit.


CFO does what? authorizing, recording, custody?

The CFO is the custodian of funds and is responsible for deposit of daily receipts.


Alpha 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 under or overstatement in revenue? receivables? inventory?

Understatement of revenue and receivables and an overstatement of inventory.


Who is responsible for the approval of bad debt write offs?

CFO. The credit manager, who reports to the CFO, usually is responsible for authorizing write-offs of bad debts based on evidence such as aging reports and collection agency reports. The CFO, or another official not involved with sales transactions and recordkeeping, will also approve the write-off.


Under effective internal controls, the Sales Department should be responsible for which of the following activities?
A. Receipt of returned goods.
B. Recording of credit memos related to sales returns and allowances.
C. Authorization of write-offs of uncollectible accounts.
D. Approval of the return of defective merchandise.

Approval of the return of defective merchandise.


To safeguard the assets through effective internal control, accounts receivable that are written off should be transferred to

A separate ledger. Accounts receivable that are written off should be transferred to a separate ledger. This ledger should be maintained by the accounting department and periodically reviewed to determine if any of the accounts have become collectible.


For control purposes, all receipts of goods or materials should be handled by:

the receiving clerk


The erroneous entry of a customer’s name into the field that should contain the amount of the sale is detected by:

a field check.
The erroneous entry of a customer’s name into the field that should contain the amount of the sale is detected by a field check. This control identifies an alphabetic character in a field that should contain only numeric characters.


What is batch processing good for?

Batch processing is useful for processing large volumes of data, especially when sorted in sequential order, for example, by customer number. Editing (validation) of data should produce a cumulative automated error listing that includes not only errors found in the current processing run but also uncorrected errors from earlier runs. Each error should be identified and described, and the date and time of detection should be given. The creation of the file also generates various totals that serve as controls over the accuracy of the processing.