While performing an internal control audit in conformity with PCAOB Standard No. 5, the auditors must be able to identify both control strengths and control weaknesses. Items (1) through (11) present various control strengths and deficiencies. For each item, select from the following list the appropriate response.
A. Control strength for the revenue cycle (including cash receipts).
B. Control deficiency for the revenue cycle (including cash receipts).
C. Control strength unrelated to the revenue cycle.
1. Credit is granted by a credit department.
2. Sales returns are presented to a sales department clerk who prepares a written prenumbered shipping report.
3. Statements are sent monthly to customers.
4. Write-offs of accounts receivable are approved by the controller.
5. Cash disbursements over $10,000 require two signatures on the check.
6. Cash receipts received in the mail are received by a secretary with no record keeping responsibility.
7. Cash receipts received in the mail are forwarded unopened, with remittance advices, to accounting.
8. The cash receipts journal is prepared by the treasurer’s department.
9. Cash is deposited weekly.
10. Support for disbursement checks is canceled after payment by the treasurer.
11. Bank reconciliation is prepared by individuals independent of cash receipts record keeping.

  • CreatedOctober 27, 2014
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