[snowwing3731]

The Ninja AUD question below gave the answer B. But I believe that D could also can be correct because when employees prepare bank reconciliation, they could identify the variance between the amount deposited into bank and the amount dr.cash and cr. AR. Please help….

Field, CPA, is auditing the financial statements of Miller Mailorder, Inc., (MMI) for the year ended January 31, 20X1. Field has compiled a list of possible errors and fraud that may result in the misstatement of MMI’s financial statements, and a corresponding list of internal controls that, if properly designed and implemented, could assist MMI in preventing or detecting the errors and fraud. Select the internal control that most likely could assist MMI in preventing or detecting the recording of a credit for the customer’s full account balance when the customer’s check is for less than the customer’s full account balance.

A.

Remittance advices are separated from the checks in the mailroom and forwarded to the accounting department.

B.(Correct)

Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slips.

C.

Validated deposit slips are compared with the cashier’s daily cash summaries.

D.

An employee other than the bookkeeper periodically prepares a bank reconciliation.

[okcpa2015]

@snowwing, think of it this way… what does the individual performing the control have 100% certainty of… what's going into the bank.

That amount has to tie back to the receivables ledger (credit amounts) and list of remittances. If there is a difference to reconcile the person performing the control would go look to the remittances because there is no way they can change the amount of cash they received.

D wouldn't provide much control at all.

Hope that makes sense, good luck!

FAR - 91
REG - 88
AUD - 98
BEC - 88

[snowwing3731]

@okcpa2015, thank you so much! It makes sense if focus the point on internal control….

[Author]

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