Exam 9: Auditing the Revenue Cycle

Warehouse stock records are the formal accounting records for inventory.

Sales orders should be prenumbered documents.

An advantage of real-time processing of sales is

Which document is included with a shipment sent to a customer?

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 is the purpose(s) of the stock release document?

Adjustments to accounts receivable for payments received from customers is based upon

Which situation indicates a weak internal control structure?

The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in the

A cash prelist is

Give three examples of Access Control in a Point-of-Sale (POS) system.

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

All of the following are advantages of real-time processing of sales except

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.

Determining that the AR balance states its net realizable value tests the management assertion of existence of occurrence.

The billing department is not responsible for

For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: remittance advice, remittance list, deposit slip.

If a customer submits a written purchase order, there is no need to prepare a sales order.

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

What task can the accounts receivable department engage in to verify that all checks sent by the customers have been appropriately deposited and recorded?