ExpertHard1 markMultiple Choice
CPA · Question 17 · Area 2: Risk Assessment
Which of the following scenarios represents the greatest segregation of duties conflict in the revenue cycle?
Which of the following scenarios represents the greatest segregation of duties conflict in the revenue cycle?
Answer options:
A.
The shipping clerk prepares the bill of lading and updates the inventory records.
B.
The accounts receivable clerk also approves credit memos for sales returns.
C.
The sales manager approves credit limits for new customers.
D.
The cashier prepares the daily deposit slip and the daily cash summary.
How to approach this question
Look for the combination of ARC: Authorization, Record Keeping, Custody. Combining Record Keeping (A/R) and Authorization (Credit Memos) allows concealment of theft.
Full Answer
B.The accounts receivable clerk also approves credit memos for sales returns.✓ Correct
Segregation of duties seeks to separate Authorization, Record Keeping, and Custody. Allowing the A/R clerk (Record Keeping) to approve credit memos (Authorization) allows them to conceal the theft of cash receipts by writing off the receivable as a return.
Common mistakes
Focusing on sales/credit conflict (which is bad business, but less of a fraud concealment risk than A/R + Credit Memos).
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