Which of the following internal control procedures will most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable?
A)Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.
B)Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.
C)Write-offs must be approved by the cashier who is in a position to know if the accounts receivable have,in fact,been collected.
D)Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

Question

Quizplus · Accepted Answer

Requiring approval from a responsible officer after review of credit department recommendations and supporting evidence ensures that write-offs are not made arbitrarily and without proper justification. This helps to prevent the concealment of a cash shortage resulting from improper write-offs. Choice B only requires an aging schedule, which may not necessarily provide sufficient evidence of the legitimacy of the write-off. Choice C only involves the cashier, who may not have sufficient knowledge of the accounts receivable or the reasons for the write-off. Choice D allows field sales employees to make authorization, which may result in conflicts of interest and improper write-offs.

Which of the Following Internal Control Procedures Will Most Likely