17. The revenue cycle consists of which of the following key subsystems a. sales order processing and credit authorization b. transaction processing and management reporting c. credit authorization and cash receipts d. sales order processing and cash receipts 18. When certain customers made cash payments to reduce their accounts receivable balances, the bookkeeper embezzled the cash and wiote off the accounts as uncollectible. Which physical control procedure would most likely prevent this irregularity? a. Segregation of duties b. Accounting records c. Transaction authorization d. Access controls 19. Which of the following situations is not a segregation of duties violation? a. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, is responsible for updating the inventory subsidiary ledger. b. The cash receipts clerk prepares the deposit for the bank and records the checks in the cash receipts journal. c. The sales manager has the responsibility to approve credit and the authority to write off accounts as bad debts. d. The accounting clerk who shares the record keeping responsibility for the accounts receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger to the general ledger control account. 20. The underlying assumption of reasonable assurance regarding the implementation of internal control suggests that a. a well-designed system of internal controls should prevent or detect all errors and fraudulent activity. b. the degree of effectiveness of an internal control system is dependent on the control environment and the degree of assurance provided. c. the objectives of an internal control system will vary depending on the data processing method used to process transactions. d. no system of internal control is going to prevent or detect all material misstatements or frauds and the cost of achieving improved control should not outweigh the benefit that it provides. 22. Authorization for a sales transaction is best accomplished by a. separate credit function performing credit check and approving the sale b. customer providing a formal sales order and approving the sale c. sales function creating sales order documents based on the customer's sales order d. manager of the sales department approving the sale 23. Which of the following is not one of the objectives for segregating duties to minimize incompatible functions in a business organization? a. Authorization for a transaction should be separate from the processing of the transaction. b. Organization should be structured so that collusion between two or more individuals with incompatible duties is required for a successful fraud to occur. c. Access should be restricted so that only authorized individuals have access to the firm's assets. d. Responsibility for the custody of assets should be separate from the recordkeeping responsibility. 24. The shipping department compares the physical items received from the warehouse with the packing list and shipping notice to ensure that a. credit has been checked and approved prior to actual shipment b. billing will be issued to the correct customer c. goods shipped agree with the goods ordered giving consideration to items on backorder d. inventory records are updated for the actual quantity of goods shipped 25. Which of following functions should be segregated? a. Opening the mail and creating a list of payment remittances received from customers b. Preparing customer billings and posting the billings to the sales journal c. Maintaining the accounts receivable subsidiary ledger and handling customer queries regarding their account balances d. Maintaining the accounts receivable subsidiary ledger and the general ledger 26. When duties cannot be appropriately segregated, which of the following internal control procedures will most often provide compensating control? a. Supervision b. Independent verification c. Access controls d. Accounting records
