Exam 4: The Revenue Cycle

What specific internal control procedure would prevent the sale of goods on account to a fictitious customer?

The accounts receivable clerk is responsible for updating the AR control accounts to reflect each customer sale.

Sales return involves receiving,sales,credit,and billing departments,but not accounts receivable.

The principal source document in the sales order system is the sales order.

When Clipper Mail Order Co.receives telephone and fax orders,the billing department prepares an invoice.The invoice is mailed immediately.A copy of the invoice serves as a shipping notice.The shipping department removes inventory from the warehouse and prepares the shipment.When the order is complete,the goods are shipped.The clerk checks the customer's credit before recording the sale in the general journal and the account receivable subsidiary ledger. ​ The receptionist opens the mail and lists all payments.The receptionist also handles all customer complaints and prepares sales return forms for defective merchandise.The cashier records all cash receipts in the general journal and makes the appropriate entry in the accounts receivable subsidiary ledger.The cashier prepares the daily bank deposit. Describe at least five internal control weaknesses at Clipper Mail Order Co.

In the revenue cycle,the internal control "limit access" applies to physical assets only.

Describe two common methods for achieving multilevel security.

A customer payment of $247 was correctly posted in the general ledger but was recorded as $274 in the customer's account receivable.Describe a specific internal control procedure that would detect this error.

What function does the receiving department serve in the revenue cycle?

What specific internal control procedure would prevent the shipping clerk from taking goods from the storeroom and sending them to someone who had not placed an order?

The purpose of the sales invoice is to

A credit sale is made to a customer,even though the customer's account is four months overdue.Describe a specific internal control procedure that would prevent this from happening.

The stock release copy of the sales order is not used to

Which type of control is considered a compensating control?

What specific internal control procedure would prevent an increase in sales returns since salespeople were placed on commission?

Which document triggers the revenue cycle?

The revenue cycle utilizes all of the following files except

What specific internal control procedure would detect the misplacement of a prepared sales invoice that was not mailed to the customer? The invoice was never found.

In a basic technology revenue cycle system,a robust password control policy should be implemented.

In most large organizations,the journal voucher file has replaced the formal general journal.