Which of the Following Would Offer the Best Protection for a Company
Which of the following would offer the best protection for a company that wishes to prevent a reoccurrence of a previously detected "lapping" problem with trade accounts receivable?
A) Segregate duties so that the bookkeeper in charge of the general ledger has no access to incoming mail.
B) Segregate duties so that no employee has access to both checks from customers and currency from daily cash receipts.
C) Have customers send payments directly to the company's depository bank.
D) Request that customer's payment checks be made payable to the company and addressed to the treasurer.
Preparation of a proof of cash would not be useful in discovering differences between the actual and reported cash balances if the differences were due to:
A) deposits in transit.
B) collections on the company's behalf by the bank which are deposited directly to the company's account.
C) cash receipts that were not recorded in the relevant accounting records.
D) service charges.
The completeness transaction-related audit objective must be considered when determining key controls for for sales.List three key controls that must be considered when cash received is recorded in the cash receipts journal.
Explain what lapping means,and discuss the internal control deficiency that allows it to occur.Also discuss the procedures the auditor can perform to detect lapping.