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Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debt write-offs?
Suggested Answer: D
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Choice 'd' is correct. When obtaining an understanding of an entity's internal control in a financial statement audit, an auditor is not obligated to search for significant deficiencies in the operation of internal control.
Choice 'a' is incorrect. In order to determine the nature, timing and extent of tests to be performed, an auditor must determine whether the control activities have been implemented.
Choice 'b' is incorrect. An auditor is required to perform procedures to confirm his/her understanding of the internal control systems' design, and to determine whether relevant controls have been implemented.
Choice 'c' is incorrect. An auditor is required to document his or her understanding of the entity's internal control components, even if he or she intends to use a substantive approach.
36 comments · newest first
BE
Bernardine
10 months ago
Totally agree with C! It really helps keep things in check.
RO
Rodrigo
11 months ago
Wait, are we sure D really helps? Seems a bit too indirect to me.
FR
Frederica
11 months ago
A is about cash access, but it doesn't really tackle bad debt directly.
IL
Ilda
11 months ago
I disagree, I think B is more effective for preventing bad debts.
WE
Werner
11 months ago
Option C seems solid, separating credit from sales is key.
BR
Brandee
12 months ago
I definitely recall discussing the risks of allowing sales and credit functions to overlap. Option C seems like the most effective control to mitigate those risks.
CA
Cassie
12 months ago
I feel like option D could be relevant too, but I’m not confident. Reconciliation seems important, but I’m not sure how it directly addresses the bad debt issue.
AL
Alishia
12 months ago
I'm not entirely sure, but I remember a practice question that discussed the importance of matching documents. Maybe option B is also a good choice since it involves oversight.
SH
Sharika
1 year ago
I think option C makes sense because separating credit-granting from sales could help reduce pressure on salespeople to push for more sales without considering credit risk.
MA
Martina
1 year ago
I'm feeling pretty confident about this one. Segregation of duties is a classic control to prevent this kind of issue.
OD
Odette
1 year ago
Okay, I think I've got this. The key is separating the sales and credit functions to create checks and balances.
VI
Vinnie
1 year ago
Hmm, I'm a bit unsure about this one. I'll have to review the material on internal controls again.
FL
Fletcher
1 year ago
This seems like a tricky question. I'll need to think through the different control options carefully.
DO
Dorthy
1 year ago
Whoa, lots of options here. I'll need to really analyze each one to determine the most effective control.
WA
Walker
1 year ago
Hmm, I'm a bit unsure about this one. I'll need to review my notes on Intrusion Prevention to make sure I understand the differences between the options.
SA
Santos
1 year ago
I've worked with WebLogic patching before, so I think I've got this. The key is downloading the patches from My Oracle Support and then using the right tool to apply them.
CA
Carin
1 year ago
Option E: Hire sales reps who are also stand-up Carins - they'll be too busy telling jokes to worry about maximizing sales volume!
FR
Frankie
1 year ago
If I were a sales rep, I'd be tempted to go with Option A - get that cash in hand and worry about the write-offs later! But I guess that's why they call it 'internal control'.
TA
Taryn
1 year ago
Yeah, separating credit-granting from sales could definitely help maintain a balance.
MI
Michel
1 year ago
I agree, maybe Option C would be a better choice to prevent bad debt write-offs.
MA
Marnie
1 year ago
Option A sounds risky, we need to think long-term.
BE
Bev
1 year ago
Option D also sounds like a good control, as reconciling the subsidiary accounts receivable to the control account can help identify any discrepancies or unauthorized write-offs.
DO
Dottie
1 year ago
C) Employees involved in the credit-granting function are separated from the sales function.
BR
Brice
1 year ago
B) Shipping documents and sales invoices are matched by an employee who does not have authority to write off bad debts.
PE
Penney
1 year ago
A) Employees responsible for authorizing sales and bad debt write-offs are denied access to cash.
JA
Jaclyn
2 years ago
I agree with Lynelle. Keeping the credit and sales roles distinct is a smart way to prevent conflicts of interest and ensure proper oversight.
FR
Francisca
1 year ago
C) Employees involved in the credit-granting function are separated from the sales function.
ED
Edelmira
1 year ago
A) Employees responsible for authorizing sales and bad debt write-offs are denied access to cash.
CL
Clemencia
1 year ago
D) Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit.
JA
Jacob
1 year ago
C) Employees involved in the credit-granting function are separated from the sales function.
TO
Tom
1 year ago
B) Shipping documents and sales invoices are matched by an employee who does not have authority to write off bad debts.
NI
Nikita
1 year ago
A) Employees responsible for authorizing sales and bad debt write-offs are denied access to cash.
LY
Lynelle
2 years ago
Option C seems the most effective in reducing the tendency of sales personnel to prioritize sales volume over bad debt management. Separating the credit-granting and sales functions can help maintain proper checks and balances.
KR
Kristian
2 years ago
I'm not sure, but option D also sounds like a good control to reconcile accounts receivable records independently.
HU
Huey
2 years ago
I agree with Jamal, option C seems like a good control to prevent high bad debt write-offs.
JA
Jamal
2 years ago
I think option C would be effective because it separates the credit-granting function from sales.