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Following Are a Number of Potential Misstatements That Might Occur

Question 72

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Following are a number of potential misstatements that might occur in the revenue cycle. Also listed are a number of necessary controls for this cycle. For each potential misstatement, indicate, using the assigned letter, the necessary control that would most likely prevent or detect the misstatement.

Premises:

Responses:

Cash may not be deposited intact daily.

Independent check of agreement of cash and checks with cash count sheets and prelist.

Receipts may be posted to the Wrong customer account.

Management actively follow up on past due receivables.

Mail receipts may be lost or misappropriated after receipt.

Computer comparison of information included in cash receipts journal with information from prelist.

Some receipts may not be recorded.

Mailing of statements to customers.

Errors may be made in journalizing receipts.

Independent check of agreement of remittance advices with prelist.

Errors may be made in recording cash receipts.

Use of cash registers or point-of-sale devices.

Cash sales may not be registered.

Restrictive endorsement of checks immediately on receipt.

Remittance advices may not agree with the prelist.

Independent check of agreement of validated deposit slip with daily cash summary.

Cash receipts may not be recorded or may be posted to the wrong accounts.

Computer agreement of amounts journalized and posted with daily cash summary.

Cash and checks received for deposit may not agree with the cash count sheets and prelist.

Preparation of periodic bank reconciliations.

Premises:

Cash may not be deposited intact daily.

Receipts may be posted to the Wrong customer account.

Mail receipts may be lost or misappropriated after receipt.

Some receipts may not be recorded.

Errors may be made in journalizing receipts.

Errors may be made in recording cash receipts.

Cash sales may not be registered.

Remittance advices may not agree with the prelist.

Cash receipts may not be recorded or may be posted to the wrong accounts.

Cash and checks received for deposit may not agree with the cash count sheets and prelist.

Responses:

Independent check of agreement of cash and checks with cash count sheets and prelist.

Management actively follow up on past due receivables.

Computer comparison of information included in cash receipts journal with information from prelist.

Mailing of statements to customers.

Independent check of agreement of remittance advices with prelist.

Use of cash registers or point-of-sale devices.

Restrictive endorsement of checks immediately on receipt.

Independent check of agreement of validated deposit slip with daily cash summary.

Computer agreement of amounts journalized and posted with daily cash summary.

Preparation of periodic bank reconciliations.

Correct Answer:

Premises:

Responses:

Cash may not be deposited intact daily.

Receipts may be posted to the Wrong customer account.

Mail receipts may be lost or misappropriated after receipt.

Some receipts may not be recorded.

Errors may be made in journalizing receipts.

Errors may be made in recording cash receipts.

Cash sales may not be registered.

Remittance advices may not agree with the prelist.

Cash receipts may not be recorded or may be posted to the wrong accounts.

Cash and checks received for deposit may not agree with the cash count sheets and prelist.