Which of the Following Is a Weak Internal Control Over

question 103

Multiple Choice

Which of the following is a weak internal control over cash collections from receivables?

• A) The credit department should have no access to cash.
• B) A credit department should evaluate customers' credit applications to determine whether they meet the company's approval standards.
• C) A company should have written approval standards for processing customers' credit applications.
• D) In order to avoid losing sales, all customers' credit applications should be approved.

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Definitions:

Capitalization of Interest

The process of adding accumulated interest to the principal balance of a loan, which then earns further interest.

Construction

The process or art of building structures, such as buildings, bridges, or roads.

Actual Borrowings

Actual borrowings refer to the actual amount of funds a company or individual has borrowed from lenders or financial institutions, as opposed to planned or potential borrowing amounts.

Capitalize

The process of recording an expenditure as an asset, rather than an expense, thus spreading the cost over its useful life.