Describes the Four Basic Categories of Controls That Might Reduce

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The Answer is a. Performance reviews or monitoring controls provide active monitoring of risk conditions and timely responses to increased risk, which are important for establishing control within a process. Within sales and customer service processes, the auditor should expect to see effective monitoring of competition, customer attributes, technological advances, operational effectiveness, and overall performance.
b. Segregation of duties will definitely be addressed by the auditor. Clearly, some duties within a process are likely to be incompatible, and failure to achieve adequate separation of these activities could create opportunities to commit fraud or allow processing errors to go undetected. For sales and customer service, we should see a number of duties separated such as credit approval and sales entry, inventory and shipping, billing, cash receipt handling and receivable posting, and data processing and transaction authorization.
c. Processing controls reflect a broad range of procedures including required authorizations, use of adequate documents and records, and independent verification of information. For example, appropriate authorization procedures should be specified for granting credit, setting prices, releasing shipments, and accepting sales returns. Appropriate documents should be used within the process such as order entry forms, shipping documents, invoices and remittance advices. In addition, some aspects of the process may be subject to independent verification including reviewing and comparing documents for discrepancies, checking batch and control totals, monitoring open transactions, and investigating customer complaints or discrepancies. These procedures may be directly relevant to the auditor's evaluation of internal control over financial reporting.
d. Physical controls limit access to tangible assets, cash, and accounting records in order to minimize risks arising from unauthorized decisions or actions. The receipt of cash is an area where physical control is particularly critical.

Describes the Four Basic Categories of Controls That Might Reduce

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Describes the Four Basic Categories of Controls That Might Reduce

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Correct Answer:
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