Two Features of Internal Control Are Presented in the Following

question 20

Short Answer

Two features of internal control are presented in the following sections. Each is followed by a list of four irregularities that occurred in processing data. Identify the one irregularity from each list that would be discovered or prevented by the feature of internal control described.(a)The sum of the balances of the accounts in the customer's ledger is compared at the end of each month with the balance of the accounts receivable account in the general ledger by a person who has no responsibility for maintaining either the general ledger or the customers ledger.(1)Five hours of services were rendered but the customer was only billed for four hours.(2)A cash receipt of $750 was recorded correctly in the accounts receivable controlling account but was posted to the customer's ledger as $75.(3)A bill for services rendered to Cole Co. was erroneously posted to the account of Coleman Co. in the customer's ledger.(4)No entry was made in the accounting records for services rendered to a customer.(b)Both cash and credit charges for services rendered are recorded on prenumbered invoices. At the end of the day, all invoices are accounted for before the duplicate copies of the invoices are routed to the accounting department for entry into the accounts and the cash is sent to the cashier's department for deposit.(1)Some charge customers complained that the monthly statements of account did not add all amounts correctly.(2)Some clerks used incorrect hourly rates in preparing invoices.(3)Some clerks destroyed duplicate copies of cash invoices and misappropriated the cash.(4)Some charge customers complained that the monthly statement of account did not indicate credits for payments made.

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Definitions:

Shareholder's Derivative Suit

A lawsuit brought by a shareholder on behalf of a corporation against a third party, often an insider of the corporation, for harm done to the corporation.

Direct Suit

A legal action initiated directly by an individual or entity against another party, without the need for intermediary steps, typically for injury or damage.

Lawsuit

A legal action brought in court by one party against another for the purpose of obtaining a remedy such as damages or specific performance.

Litigation Right

The legal ability to initiate a lawsuit or engage in court proceedings as a method of resolving disputes.