Assignment in Internal Control

DON HONORIO VENTURA STATE UNIVERSITY
Bacolor, Pampanga
COLLEGE OF BUSINESS STUDIES
ACTIVITY IN GOVBUSMAN
Juan, CPA is auditing the financial statements of ABC Inc for the year ended December 31,
2020. Juan has compiled a list of possible errors and fraud that may result in the misstatement
of ABC Inc. financial statements and a corresponding list of controls that if properly designed
and implemented could assist ABC INC. in preventing or detecting the errors and fraud.
Required:
For each possible error and fraud numbered 1 to 15, select one internal control from the
answer list below, that if properly designed and implemented most likely could assist ABC Inc. in
preventing error and fraud. Write your answers on the following from 1 to 15 (CAPITAL letters
only).
Possible Errors and Fraud
1. Invoices for goods sold are posted in incorrect customer accounts.

2. Goods ordered by customers are shipped but are not billed to anyone.
3. Invoices are sent for shipped goods but are not recorded in the sales journal.
4. Invoices are sent for sippeds goods and are recorded in the sales journal,
but are not posted to any customer account.
5. Credit sales are made to individuals with unsatisfactory credit ratings.
6. Goods are removed from the inventory for unauthorized orders.
7. Goods shipped to customers do not agree with goods ordered by customers.
8. Invoices are sent to allies in a fraudulent scheme and sales are recorded for fictitious
transactions.
9. Customer\s checks are received for less than the customers full account balances,
but the customers full account balances are credited.
10. Customer checks are misappropriated before being forwarded to the cashier for deposit.
11. Customers check are credited to incorrect customer accounts.
12. Different customer accounts are each credited for the same cash receipt
13. Customers check are properly credited to customers accounts and are properly deposited
but errors are made in the cash receipts journal
14. Customers check are misappropriated after being forwarded to the cashier for deposit.
15. Invalid transactions granting credit for sales returns are recorded.
CONTROLS
A. Shipping clerks compare goods received from the warehouse with the details on the
shipping documents.
B. Approved sales orders are required for goods to be released from the warehouse.
C. Monthly statements are mailed to all customers with outstanding balances.
D. Shipping clerks compare goods received from the warehouse with approved sales
orders.
E. Customer orders are compared with the inventory master file to determine whether items
ordered are in stock.
F. Daily sales summaries are compared with controls totals of inventories.
G. Shipping documents are compared with sales invoices when goods are shipped.
H. Sales invoices are compared with the master price file.
I. Customer orders are compared with an approved customer list.
J. Sales orders are prepared for each customer order.
K. Control amounts posted to the accounts receivable ledger are compared with control
totals of invoices.
L. Sales invoices are compared with shipping documents and approved customer orders
before invoices are mailed.
M. Pre-numbered credit memos are used for granting credit for goods returned.
N. Good returned for credit are approved by the supervisor of the sales department.
O. Remittance advices are separated from the checks in the mailroom and forwarded to the
accounting department.
P. Total amounts posted to the accounts receivables ledger from the remittance advices are
compared with the validated bank deposit slip.
Q. The cashier examines each check for proper endorsement.
R. Validated deposit slips are compared with the cashier’s daily cash summaries..
S. An employee other than the bookkeeper, periodically prepares bank reconciliation
T. Sales returns are approved by the same employee who issues receiving reports
evidencing actual returns of goods.
Instructions:
Write your answers on the following from 1 to 15 (letters only).Control procedures may repeat
whenever applicable
Prepared by:
Jennivib D. Diamzon, MMBM

Instructor 1

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DON HONORIO VENTURA STATE UNIVERSITY

COLLEGE OF BUSINESS STUDIES

Possible Errors and Fraud

1. Invoices for goods sold are posted in incorrect customer accounts.

Jennivib D. Diamzon, MMBM

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