Which of the Following Situations Indicates a Potential Material Weakness

question 51

Multiple Choice

Which of the following situations indicates a potential material weakness in internal control over acquisition and expenditure?

• A)Purchase orders are not prepared for services acquired directly under authorization of department heads.
• B)The same person authorizes voucher packages and signs checks.
• C)Unacceptable goods are not scheduled on receiving reports.
• D)The same person signs checks and stamps vouchers PAID.

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Definitions:

Book Value

The net value of a company's assets found on its balance sheet, which is calculated by subtracting liabilities from the total value of assets.

Commercial Substance

An economic concept indicating that a transaction significantly alters the cash flows or financial position of an entity.

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for resale, such as machinery, buildings, and land.

Recognized Immediately

Financial transactions or events are recorded as soon as they occur, without delay in the accounting period.