Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk. FRAUD9-44 LO 4Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inher-ent and fraud risks in the revenue cycle that may result in the mis-statement of MMI's financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one inter-nal control from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in pre-venting or detecting material misstatements. Internal controls can beselected for more than one risk.Inherent and Fraud RisksInternal Controls1. Invoices for goods sold are postedto incorrect customer accounts.2. Goods ordered by customers areshipped but are not billed toa. Shipping clerks compare goodsreceived from the warehouse withthe details on the shippingdocuments.anyone.3. Invoices are sent for shippedgoods but are not recorded in thesales journal.4. Invoices are sent for shippedgoods and are recorded in theb. Approved sales orders are requiredfor goods to be released from thewarehouse.c. Monthly statements are mailed to allcustomers with outstandingbalances.(continued) Inherent and Fraud RisksInternd Controlssales journal but are not posted to d. Shipping clerks compare goodsany customer account.5. Credit sales are made to indivi-duals with unsatisfactory creditratings.6. Goods are removed from inven-tory for unauthorized orders.7. Goods shipped to customers donot agree with goods ordered byreceived from the warehouse withapproved sales orders.e. Customer orders are comparedwith the inventory master file todetermine whether items orderedare in stock.f. Daily sales summaries are com-pared with control totals ofinvoices.g. Shipping documents are comparedwith sales invoices when goods areshipped.h. Sales invoices are compared withthe master price file.i. Customer orders are comparedwith an approved cu stomer list.i. Sales orders are prepared for eachcustomer order.customers.8. Invoices are sent to allies in afraudulent scheme, and sales arerecorded for fictitious transactions.9. Customers' checks are receivedfor less than the customers' fullaccount balances, but the custo-mers' full account balances arecredited.10. Customers' checks are misappropriated before they are forwarded k. Control amounts posted to theto the cashier for deposit.11. Customers' checks are credited toaccounts receivable ledger arecompared with control totals ofinvoices.I. Sales invoices are compared withshipping documents and approvedcustomer orders before invoices aremailed.incorrect customer accounts.12. Different customer accounts areeach credited for the same cashreceipt.13. Customers' checks are properlycredited to customer accounts and m. Prenumbered credit memos areare properly deposited, but errorsare made in recording receipts inthe cash receipts journal.14. Customers' checks are misappropriated after they are forwarded tothe cashier for deposit.15. Invalid transacthions granting creditfor sales returns are recorded.used for granting credit for goodsreturned.n. Goods returned for credit areapproved by the supervisor of thesales department.o. Remittance advices are separatedfrom the checks in the mailroomand forwarded to the accountingdepartment.p. Total amounts posted to theaccounts receivable ledger fromremitance advices are comparedwith the validated bank depositslip.q. The cashier examines each checkfor proper endorsement.r. Validated deposit slips are com-pared with the cashier's daily cashsummaries.s. An employee, other than the book-keeper, periodically prepares abank reconciliation.t. The same employee who issuesreceiving reports evidencing actualreturn of goods approves salesreturns.

inherent risk Inherent risk is the likelihood of misfortune dependent on the idea of an…

Answered: Field, CPA, is auditing the financial…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q