Which of the Following Poses an Internal Control Problem

question 49

Multiple Choice

Which of the following poses an internal control problem?

• A)Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this service.
• B)Products are released from inventory after a warehouse employee and a shipping clerk both sign the pick list.
• C)Sales representatives have authority to increase customers' credit limits in $1,000 increments.
• D)When customer payments are received in the mail,checks are sent to the cashier's office and remittance advices are sent to the accounts receivable department.

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Definitions:

Fair Value

Fair Value is the price at which an asset would be bought or sold in a transaction between willing parties, other than in a liquidation scenario.

Accumulated Depreciation

The total amount of depreciation for a fixed asset that has been charged to expense since the asset was acquired and put into use.

Original Cost

The initial purchase price or construction cost of an asset or investment, not adjusted for inflation, depreciation, or other factors over time.

Fair Value

An estimate of the price at which an asset or liability could be exchanged in an orderly transaction between market participants at the measurement date.