Question 1

What function does the receiving department serve in the revenue cycle?

Accepted Answer

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Question 2

The clerk who opens the mail routinely steals remittances. Describe a specific internal control procedure that would prevent or detect this fraud.

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Question 3

Which document is NOT prepared by the sales department?
A) packing slip
B) shipping notice
C) bill of lading
D) stock release

Accepted Answer

The bill of lading is a legal document between the shipper and carrier detailing the type, quantity, and destination of the goods being carried. It is not typically prepared by the sales department but by the shipping or logistics department.

Question 4

A customer payment of $247 was correctly posted in the general ledger but was recorded as $274 in the customer's account receivable. Describe a specific internal control procedure that would detect this error.

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Question 5

A credit sale is made to a customer, even though the customer's account is four months overdue. Describe a specific internal control procedure that would prevent this from happening.

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Question 6

What specific internal control procedure would prevent an increase in sales returns since salesmen were placed on commission?

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Question 7

What specific internal control procedure would prevent the sale of goods on account to a fictitious customer?

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Question 8

What specific internal control procedure would prevent a customer from being billed for all 50 items ordered although only 40 items were shipped?

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Question 9

For the revenue cycle, state two specific independent verifications that should be performed.

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Question 10

Distinguish between a packing slip, shipping notice, and a bill of lading.

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Question 11

State two specific functions or jobs that should be segregated in the cash receipts system.

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Question 12

A clerk embezzles customer payments on account and covers up the theft by making an adjustment to the accounts receivable ledger. Describe a specific internal control procedure that would prevent this fraud.

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Question 13

What task can the accounts receivable department engage in to verify that all checks sent by
the customers have been appropriately deposited and recorded?

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Question 14

What specific internal control procedure would prevent an accounts receivable clerk from issuing a fictitious credit memo to a customer (who is also a relative) for goods that were "supposedly" returned from previous sales?

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Question 15

What are the three rules that ensure that no single employee or department processes a transaction in its entirety?

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Question 16

What specific internal control procedure would prevent the shipping clerk from taking goods from the storeroom and sending them to someone who had not placed an order?

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Question 17

State two specific functions or jobs that should be segregated in the sales processing system.

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Question 18

What specific internal control procedure would detect the misplacement of a sales invoice after preparation and not mailed to the customer? The invoice was never found.

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Question 19

Which type of control is considered a compensating control?
A) segregation of duties
B) access control
C) supervision
D) accounting records

Accepted Answer

Compensating controls are alternative controls used when primary controls cannot be implemented. Supervision is considered a compensating control because it can mitigate the risk when segregation of duties is not feasible, by providing oversight and review of activities.

Question 20

All of the following are advantages of real-time processing of sales except
A) The cash cycle is shortened
B) Paper work is reduced
C) Incorrect data entry is difficult to detect
D) Up-to-date information can provide a competitive advantage in the marketplace

Accepted Answer

Real-time processing of sales helps to shorten the cash cycle, reduce paperwork, and provide up-to-date information which can give a competitive advantage. However, incorrect data entry may go undetected in real-time processing, which is a disadvantage.

Quiz 9: Auditing the Revenue Cycle

What function does the receiving department serve in the revenue cycle?

The clerk who opens the mail routinely steals remittances. Describe a specific internal control procedure that would prevent or detect this fraud.

Which document is NOT prepared by the sales department?

A customer payment of $247 was correctly posted in the general ledger but was recorded as $274 in the customer's account receivable. Describe a specific internal control procedure that would detect this error.

A credit sale is made to a customer, even though the customer's account is four months overdue. Describe a specific internal control procedure that would prevent this from happening.

What specific internal control procedure would prevent an increase in sales returns since salesmen were placed on commission?

What specific internal control procedure would prevent the sale of goods on account to a fictitious customer?

What specific internal control procedure would prevent a customer from being billed for all 50 items ordered although only 40 items were shipped?

For the revenue cycle, state two specific independent verifications that should be performed.

Distinguish between a packing slip, shipping notice, and a bill of lading.

State two specific functions or jobs that should be segregated in the cash receipts system.

A clerk embezzles customer payments on account and covers up the theft by making an adjustment to the accounts receivable ledger. Describe a specific internal control procedure that would prevent this fraud.

What task can the accounts receivable department engage in to verify that all checks sent by the customers have been appropriately deposited and recorded?

What specific internal control procedure would prevent an accounts receivable clerk from issuing a fictitious credit memo to a customer (who is also a relative) for goods that were "supposedly" returned from previous sales?

What are the three rules that ensure that no single employee or department processes a transaction in its entirety?

What specific internal control procedure would prevent the shipping clerk from taking goods from the storeroom and sending them to someone who had not placed an order?

State two specific functions or jobs that should be segregated in the sales processing system.

What specific internal control procedure would detect the misplacement of a sales invoice after preparation and not mailed to the customer? The invoice was never found.

Which type of control is considered a compensating control?

All of the following are advantages of real-time processing of sales except