Assume that Darrell randomly selected a sample of $75$ credit memo packages, each of which contains a credit memo with a matching receiving report and inventory warehouse receipt, and has reviewed all but the last five credit memo packages and found no exceptions. Each credit memo authorizing a customer refund or reduction in the amount owed due to the return of goods should be authorized by Brian Thompson, the accounting supervisor over accounts receivable. When a customer wants to return unwanted or defective product, they go to Hooplah$’$s website and download a $“$Customer Return Report$”$ and fill in their information as well as a description and quantity of goods being returned. Christ Jacobs in the receiving department at Hooplah uses the Customer Return Report as the receiving report when the shipment comes in$,$ and Felix Katt counts and inspects the goods to make sure they$’$re all in good condition. The goods are then transferred back to Jed Baxter in the warehouse, who issues and $“$Inventory Receipt.$”$ Once the Inventory Receipt is attached to the Customer Return Report, the documents are forwarded to Brian so that he can approve a credit memo. Brian examines the Customer Return Report and the Inventory Receipt to ensure that credit is only authorized when goods have been received and for the quantity actually received. He then documents his authorization by marking his initials on the credit memo. You have agreed to help Darrell by examining the remaining five credit memo packages. You will find the last five credit memo packages at www$.$pearsonhighered.com$/$beasley$.$ 

Examine these documents indicating that the memos were properly approved $($i$.$e$.$ the control is operating effectively$).$

Evaluate the test results for the full sample. Provide support for your assessment on the effectiveness of the control based on testing  

Answer rating: 100% (QA)

To assess the effectiveness of the control over the approval of credit memos by Brian Thompson we ne... View the full answer