Consider the Following Short Case as You Respond to the Question

question 18

Multiple Choice

Consider the following short case as you respond to the question: SPC Corporation sells computer security software.They maintain their AIS using general ledger software; data files are backed up twice a day.Sales staff can access the customer database, inventory files and general ledger, as well as sales-related documents such as invoices and sales orders.Newly hired sales staff members at SPC receive the company procedures manual which explains the process used to complete the steps in the sales/collection process.To minimize costs, SPC designates up to five sales staff members each month who can do credit checks for all new customers in addition to processing sales.SPC bills its clients monthly and uses the balance forward method of accounting for receivables; all cash receipts from clients are processed using a lockbox procedure.The lockbox firm's fee is 3% of all collections.SPC's accounting department estimates bad debts at the end of each fiscal year; they are normally about 1% of total sales.Which of the following statements about SPC is most true?

• A)Their sales/collection process demonstrates the strongest possible level of internal control.
• B)Their risk exposures include credit risk, systems risk and human error risk.
• C)Both their sales/collection process demonstrates the strongest possible level of internal control and their risk exposures include credit risk, systems risk and human error risk are true.
• D)Neither their sales/collection process demonstrates the strongest possible level of internal control nor their risk exposures include credit risk, systems risk and human error risk is true.

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Definitions:

Child Temperament

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Big Five

A personality theory that identifies five broad dimensions of human personality: Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism.

Erikson's Life Stages

A theory by Erik Erikson that outlines eight stages of psychosocial development from infancy to late adulthood, each characterized by a specific conflict.

Intimacy Versus Isolation

A stage in Erik Erikson's theory of psychosocial development where the challenge is to develop close, intimate relationships with others.