With respect to the write-off of an uncollectible account receivable against the allowance for bad debts, a sound system of internal control would require:
A) the write-off be approved by two employees.
B) an investigation of why credit was extended to this customer in the first place.
C) a lawsuit to be initiated to recover the uncollectible amount.
D)the write-off to be made within six months after the date of sale.

Question

Quizplus · Accepted Answer

Requiring approval from two employees ensures that there is oversight and reduces the risk of fraudulent write-offs. Additionally, it ensures that the write-off is based on a legitimate reason, such as an uncollectible debt. B and C do not relate to the write-off process and are not necessary for internal controls. D is not correct as there is not necessarily a set timeline for when a write-off must occur.

With Respect to the Write-Off of an Uncollectible Account Receivable