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Assignment #3 Accounts Receivable and Credit Sales The information that follows is grouped into two categories: (1) Internal Control and (2)...

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Assignment #3 Accounts Receivable and Credit Sales The information that follows is grouped into two categories: (1) Internal Control and (2) Substantive Audit Procedures. This information is to be used to complete the exercises for this assignment. Do the optional exercises only if told to do so by your instructor. Relevant Information Internal Control The following internal control questionnaire was completed by Jasper Parsons. Review this questionnaire carefully. Also, read the permanent file material describing the control environment and the accounting procedures related to the Credit Sales System. As you read this material and go through the questionnaire, keep in mind the six categories of control procedures: (1) segregation of functions, (2) access, (3) authorization, (4) input controls, (5) processing controls and (6) output controls. Then try to determine the possible errors or irregularities that could occur. Typical errors or irregularities include: 1. Sales amounts may have been incorrectly recorded 2. Goods may have been shipped but not billed to the customer 3. Sales may have been billed to the customer but not shipped 4. Sales may have been recorded in the wrong accounting period 5. Merchandise may have been sold to customers who were bad credit risks 6. Unauthorized sales may have occurred 7. Sales may have been posted to the wrong account 8. Unauthorized write-offs of receivables may have occurred. Internal Control Questionnaire - Credit Sales system Yes No Comments 1. Are customer subsidiary ledgers maintained by a person who has no access to cash? _ Accounts receivable clerk has access to customer checks and cash prelist.
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2. Are unauthorized persons unable to obtain access to customer accounts? 3. Is a record maintained of accounts previously written off? 4. Are credit sales approved by the credit manager before shipment? 5. Are sales orders approved by the sales manager? 6. Are write-offs of bad debts approved by an official not associated with the selling or credit functions? 7. Are credit memos approved by a responsible official? 8. Are invoices prenumbered and controlled? 9. Are sales invoices checked as to prices and mechanical accuracy? 10. Are credit memos prenumbered and controlled? 11. Are numbered shipping documents prepared for all shipments? 12. Are accounts aged periodically? _ _ _ _ _ _ _ _ _ _ _ All LAN reports and printouts are left unlocked and are accessible to anyone. Additionally, the cashier has access to the LAN accounts receivable application. Approved by Brenda Robertson, who initials them. Approved by Ellen Jacobs, who initials them.
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