Identify an internal control procedure that would reduce each of the risks that follow in a manual system. Also describe how (or if) an IT system could reduce these risks: Student responses may vary, as more that one control may apply to risk reduction in these circumstances. However, following are some likely answers:
a. Revenues may be recorded before the related shipment occurs.
b. Employees responsible for shipping and accounts receivable may collude to steal goods and cover up the theft by recording fictitious sales.
c. Credit memos may be issued at full price, when the goods were originally sold at a discount.
d. Sales invoices may contain mathematical errors.
e. Amounts collected on accounts receivable may be applied to the wrong customer.
f. Duplicate credit memos may be issued for a single sales return.
g. Sales invoices may not be prepared for all shipments.
h. Shipments may contain the wrong goods.
i. All sales transactions may not be included in the general ledger.