Test of Controls and Errors|Fraud Example

The following questions are taken from an Internal Control questionnaire:

1. Are blank sales invoices available only to authorized personnel?

2. Are sales invoices pre-numbered and are all numbers accounted for?

3. Are the sales invoiced checked for accuracy of quantities billed? Prices used?

Mathematical calculations or accuracy?

4. Are the duties of the Accounts Receivable clerk separate from all cash functions?

5. Are customer accounts regularly balanced with the control account?

6. Do customers receive a monthly statement even when the ending balance on the

account is zero?

Required: for each of the questions:

a. Explain one control procedure you could use to determine if the control was

functioning.

b. What error or fraud may occur if you determined the control was not effectively

working.