Which of the Following Internal Control Activities Will Most Likely

question 90

Multiple Choice

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

• A)Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.
• B)Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.
• C)Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected.
• D)Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

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Definitions:

Balance Sheet

A financial statement that shows the assets, liabilities, and equity of a company at a specific point in time, reflecting its financial position.

Prepaid Insurance

An asset account representing insurance payments made in advance for future coverage periods, recognizing expense over the coverage term.

Current Asset

An asset likely to be converted into cash within a year, used in the normal operations of a business.

Plant Asset

A long-term physical asset that is used as part of a company's operations to help in generating revenues, similar to a fixed asset but specifically related to manufacturing.