Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?
A)Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.
B)Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.
C)Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected.
D)Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

Question

Quizplus · Accepted Answer

Requiring approval from a responsible officer after review of credit department recommendations and supporting evidence ensures that the write-off is valid and properly documented, reducing the likelihood of concealment of a cash shortage through improper write-offs. B requires an aging schedule, but that could be manipulated, and C and D do not provide sufficient oversight and verification of the write-off process.

Which of the Following Internal Control Activities Will Most Likely