A Company's Accountant Was Able to Approve Payment of Invoices

question 17

Multiple Choice

A company's accountant was able to approve payment of invoices and write company checks to a family member, with whom the accountant would split the proceeds.The accountant covered up the theft with journal entries in the AIS.Which duties should be separated to prevent such problems in the future?

• A)Authorization and custody
• B)Custody and recordkeeping
• C)Authorization and recordkeeping
• D)Control environment and control activities

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead cost to products or job orders, based on expected overhead costs and a chosen allocation base.

Variable Component

A variable component refers to a part of a cost or expense that varies directly with the level of output or activity.

Fixed Component

A portion of total costs that remains constant, regardless of changes in the production level or sales volume.

Underapplied

A situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred.