Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?
A)Merchandise received is not promptly reconciled to the outstanding purchase order file.
B)Obsolete items included in inventory balances are rarely reduced to the lower of cost or market value.
C)The write-off of receivables by personnel who receive cash permits the misappropriation of cash.
D)Fictitious transactions are recorded that cause an understatement of revenue and overstatement of receivables.

Question

Quizplus · Accepted Answer

The lack of effective internal controls in the revenue cycle could allow personnel who handle cash receipts to also write off receivables, creating an opportunity for them to misappropriate cash without detection. This is because the same individual would have control over both recording transactions and handling assets, violating the principle of segregation of duties.

Which of the Following Fraudulent Activities Most Likely Could Be