Certain Types of Misstatements That Affect Cash May Be Detected

question 41

Multiple Choice

Certain types of misstatements that affect cash may be detected in the audit of tests of controls.Which of the following misstatements would be detected in the audit of the sales and collection cycle?

• A)a defalcation of cash hidden by an unauthorized write-off of a bad debt
• B)accidental duplicate payment of a vendor's invoice
• C)payment for raw materials that were not received
• D)payment to an employee at an incorrect wage rate

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Definitions:

Supporting Service Expenses

Costs incurred by a business or organization for activities that aid the operation but do not directly contribute to the main business activity.

Not-for-Profit Entity

An organization that operates for charitable, educational, cultural, religious, or other purposes serving the public interest, where profitability is not the primary goal.

Supporting Services Expenses

Costs incurred for activities that assist the core operations of a business but do not directly contribute to production.

Journal Entry

A recording in the accounting ledger that represents a single transaction and its effect on the accounts, consisting of at least one debit and one credit.