1. The internal auditor is reviewing shipping procedures of a manufacturing company. The auditor should be greatly concerned when
a. Merchandise is shipped without an approved customer’s order.
b. Invoiced prices on merchandise are not checked before orders are shipped.
c. The sales department is not notified promptly when merchandise is shipped.
d. Only one quotation on transportation costs is obtained. e. transportation tariffs are not checked before merchandise is shipped.

2. Which of the following is an effective internal accounting control over accounts receivable?
a. Only people who handle cash receipts should be responsible for preparing documents that reduce accounts receivable balances.
b. Responsibility for approval of the write- off of uncollectible accounts receivable should be assigned to the cashier.
c. Balances in the subsidiary accounts receivable ledger should be reconciled to the general ledger control account once a year, preferably at year end.
d. The billing function should be assigned to people other than those responsible for maintaining accounts receivable subsidiary records.

3. Which of the following would be the best protection for a company that wishes to prevent the lapping of trade accounts receivable?
a. Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail.
b. Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts.
c. Have customers send payments directly to the company’s depository bank.
d. Request that customers’ payment checks be made payable to the company and addressed to the treasurer.

4. To determine whether the system of internal accounting control operated effectively to minimize errors of failure to invoice a shipment, the auditor would select a sample of transactions from the population represented by the
a. Customer order file.
b. Bill of lading file.
c. Open invoice file.
d. Sales invoice file.

5. For effective internal accounting control, employees maintaining the accounts receivable subsidiary ledger should not also approve
a. Employee overtime wages.
b. Credit granted to customers.
c. Write- offs of customer accounts.
d. Cash disbursements.

6. Which of the following control procedures may prevent the failure to bill customers for some shipments?
a. Each shipment should be supported by a pre-numbered sales invoice that is accounted for.
b. Each sales order should be approved by authorized personnel.
c. Sales journal entries should be reconciled to daily sales summaries.
d. Each sales invoice should be supported by a shipping document.

7. To achieve good internal accounting control, which department should perform the activities of matching shipping documents with sales orders and preparing daily sales summaries?
a. Billing.
b. Shipping.
c. Credit.
d. Sales order.

8. Shipping documents should be compared with sales records or invoices to
a. Determine whether payments are applied properly to customer accounts.
b. Ensure that shipments are billed to customers.
c. Determine whether unit prices billed are in accordance with sales contracts.
d. Ascertain whether all sales are supported by shipping documents.

  • CreatedFebruary 26, 2015
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