Which of the following poses an internal control problem?
A)Credit memos are approved by the Sales Manager.
B)Disbursements of cash are approved by the Finance Manager.
C)Raw material deliveries are compared with the relevant purchase orders clerks in the Shipping and Receiving Department.
D)Bank accounts are reconciled by the Finance Department.

Question

Quizplus · Accepted Answer

Credit memos should be approved by someone independent of the sales department to prevent the potential for collusion or fraudulent activity. Therefore, having the Sales Manager approve credit memos poses an internal control problem.

The other choices listed demonstrate proper internal controls. The Finance Manager approving cash disbursements ensures that there is proper authorization for payments. Comparing raw material deliveries with purchase orders in the Shipping and Receiving Department ensures accurate and complete recording of inventory. Finally, reconciling bank accounts in the Finance Department helps ensure accurate financial statements and reduces the risk of errors or fraud.

Which of the Following Poses an Internal Control Problem