Alabama Industries manufactures and wholesales small tools. It sells the tools to a large group of regular
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(a) What sort of preventive control could be used to deal with the problems faced by Alabama Industries? Explain how the control would work.
(b) Assume the preventive control is implemented, and during this year there have been no sales to customers that have taken any customer beyond its credit limit. What are two possible explanations for this that the auditor must consider?
(c) If an auditor finds two sales transactions during the year that are in excess of a customer's credit limit at the time of the sale, what conclusion would the auditor draw from this evidence? What other evidence could the auditor consider before concluding that the preventive control has failed?
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