Consider the Following Short Case as You Respond to the Question

question 11

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.Internal control weaknesses for SPC are indicated by which of the following?

• A)Sales staff access to the AIS
• B)Paying a fee to a lockbox firm
• C)Estimating bad debts using total sales
• D)All of these

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Definitions:

Liquidity Trap

A situation in which interest rates are low and savings rates are high, rendering monetary policy ineffective in stimulating economic growth.

John Maynard Keynes

A British economist whose innovative ideas transformed the approach to macroeconomics and influenced governmental economic policies.

John Maynard Keynes

A UK-based economist whose theories revolutionized both the practice and understanding of macroeconomics as well as state economic policies.

Liquidity Trap

A situation in an economy where interest rates are low or near-zero, causing monetary policy to become ineffective in stimulating the economy.