During a Review of a Small Business Entity's Internal Control

question 69

Multiple Choice

During a review of a small business entity's internal control system, the auditor discovered that the accounts receivable clerk approves credit memos and has access to cash. Which of the following controls would be most effective in offsetting this weakness?

• A)The owner reviews errors in billings to customers and postings to the subsidiary ledger.
• B)A controller receives the monthly bank statement directly and reconciles the checking accounts.
• C)The owner reviews credit memos before they are recorded.
• D)The controller reconciles the total of the detailed accounts receivable accounts to the amount shown in the ledger.

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Definitions:

Quid Pro Quo

A Latin phrase meaning "something for something," which refers to a mutually beneficial exchange or transaction.

Harassment

Unwanted conduct affecting the dignity of men and women in the workplace or social environment, often involving creating an intimidating, hostile, degrading, or offensive atmosphere.

Fondle

To touch or stroke gently and affectionately.

Self-esteem

An individual's subjective evaluation of their own worth or abilities; their overall sense of personal value.