Auditing Quiz

Quiz 6

1. Mill Co. uses a batch processing method to process its sales transactions. Data on Mill’s sales transaction file are electronically sorted by customer number and are subjected to programmed edit checks in preparing its invoices, sales journals, and updated customer account balances. One of the direct outputs of the creation of this file most likely would be a

Report showing exceptions and control totals

3. Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?

Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash

4. Sound internal control activities dictate that defective merchandise returned by customers be presented initially to the

Receiving clerk

5. Employers bond employees who handle cash receipts because fidelity bonds reduce the possibility of employing dishonest individuals and

Deter dishonesty by making employees aware that insurance companies may investigate and prosecute dishonest acts.

6. Proper authorization of write-offs of uncollectible accounts should be approved in which of the following departments?

CFO

8. One 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

Using predetermined totals to control posting routines.

9. The internal control objectives of the revenue cycle include all of the following except

Appropriate goods are ordered so that sales can be made.

10. Immediately upon receipt of cash, a responsible employee should

Prepare a remittance listing.

12. Which of the following internal controls most likely would reduce...