The internal control questionnaire in Figure 7-4 includes the following questions:

1. Are all credit sales approved by credit department?

2. Are all sales orders authorized as to prices and terms?

3. Are goods compared to sales order before shipment?

4. Are prenumbered shipping documents prepared and accounted for?

5. Is there internal verification of the accuracy of the invoice?

6. Are postings to the customers' ledger made independent of journalizing?

7. Are daily sales journal entries agreed with daily sales summaries?
8. Is there independent reconciliation of subsidiary records and control accounts?
Required:

a. Identify the internal accounting control objective to which each question relates (i.e., executing, recording, or custody).

b. Identify the function and specific internal accounting control objective to which each question pertains.

c. Indicate the internal accounting control principle that is involved.

d. Identify an error or irregularity that may result from a No answer to each question. (Present your answer in tabular form by using separate columns for each of the four parts.)

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INTERNAL CONTROL QUESTIONNAIRE Cycle: Revenue Class of transactions: Sales Executing Transactions Is there appropriate segregation of functions in executing transactions? Are sales orders prenumbered and controlled by the sales department? Are all credit sales approved by credit department? Are all sales orders authorized as to prices and terms? Are orders filled and shipped on basis of approved sales orders? Are goods compared to sales order before shipment? Are prenumbered shipping documents prepared and accounted for? Is a receipt obtained from freight carrier for goods shipped? Are details of shipping documents compared to sales order prior to billing? Are prenumbered sales invoices used and accounted for? Is there internal verification of the accuracy of the invoice? Are daily sales summaries prepared and agreed to invoices issued? Recording Transactions Are postings to the customers' ledger made independent of journalizing? Are daily sales journal entries agreed with daily sales summaries? Are all invoices journalized in numerical sequence and accounted for? Maintaining Custody of Assets Are there adequate physical controls over accounts receivable records? Is there independent reconciliation of subsidiary customers' ledger and ac- counts receivable control? Is there independent mailing of monthly statements to customers? Figure 7-4. INTERNAL CONTROL QUESTIONNAIRE: SALES TRANSACTIONS