Exam 4: The Revenue Cycle

The clerk who opens the mail routinely steals remittances and checks. Describe a specific internal control procedure that would prevent or detect this fraud.

How is EDI more than technology? What unique control problems may it pose?

Discuss two IT controls or edits that can be programmed into a system to minimize the risk from data input errors.

When customer payments are received, the mailroom clerk sends the checks to the cash receipts clerk and the remittance advices to the AR clerk.

Inventory control has physical custody of inventory.

Which department prepares the bill of lading?

Customers should be billed for back-orders when

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 four internal control weaknesses at Clipper Mail Order Co.

Another name for the stock release form is the picking ticket.

With regard to segregation of duties, rule one is that transaction authorization and transaction processing should be separated. What does this require in the revenue cycle?

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.

The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. The best internal control to detect this error is

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

Goods are shipped to a customer, but the shipping department does not notify billing and the customer never receives an invoice. Describe a specific internal control procedure that would detect this error.

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

The cash receipts journal is a special journal.

The accounts receivable clerk destroys all invoices for sales made to members of her family and does not record the sale in the accounts receivable subsidiary ledger. Which procedure will not detect this fraud?

Good internal controls in the revenue cycle should ensure all of the following except

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

Which of the following is not a risk exposure in a PC accounting system?