Consider the Following Short Case as You Respond to the Question

question 39

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.Based on its risk exposures, SPC would benefit most from implementing which of the following internal controls?

• A)Cross-training employees
• B)Separation of duties
• C)Normalized database files
• D)Use of the COSO internal control framework

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Definitions:

Tivoli

A town in Italy, known for its historical sites, including the Roman ruins of Villa Adriana and the Renaissance architectural complex Villa d'Este.

Hadrian

Roman Emperor from 117 to 138 A.D., known for constructing Hadrian's Wall which marked the northern limit of Britannia.

Architectural Coffering

A series of sunken panels in the shape of squares, rectangles, or octagons in a ceiling, soffit or vault, used as a decorative element in classical architecture.

Lighten Weight

The process or action of making an object less heavy or reducing its mass.