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Below Are Descriptions of Internal Control Problems

Question 111

Matching

Below are descriptions of internal control problems. Enter the code letter of the one best internal control activity that is related to the problem described. Each code letter can be used more than once.

Premises:

Responses:

Some cash payments are not recorded because cheques are not prenumbered.

Physical and IT controls

The controller of the company has not taken a vacation for over 20 years.

Documentation procedures

A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.

Segregation of duties

The person who is authorized to sign cheques approves purchase orders for payment.

Independent checks of performances

Three people handle cash sales from the same cash register drawer.

Human resource controls

The same person opens incoming mail and posts to the accounts receivable subsidiary ledger.

Establishment of responsibility

Cash shortages are not discovered because there are no daily cash counts by supervisors.

Premises:

Some cash payments are not recorded because cheques are not prenumbered.

The controller of the company has not taken a vacation for over 20 years.

A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.

The person who is authorized to sign cheques approves purchase orders for payment.

Three people handle cash sales from the same cash register drawer.

The same person opens incoming mail and posts to the accounts receivable subsidiary ledger.

Cash shortages are not discovered because there are no daily cash counts by supervisors.

Responses:

Physical and IT controls

Documentation procedures

Segregation of duties

Independent checks of performances

Human resource controls

Establishment of responsibility

Correct Answer:

Premises:

Responses:

Some cash payments are not recorded because cheques are not prenumbered.

The controller of the company has not taken a vacation for over 20 years.

A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.

The person who is authorized to sign cheques approves purchase orders for payment.

Three people handle cash sales from the same cash register drawer.

The same person opens incoming mail and posts to the accounts receivable subsidiary ledger.

Cash shortages are not discovered because there are no daily cash counts by supervisors.