PONPON, FLORENDA P.

NOVEMBER 7, 2020

INTERNAL CONTROL FAILURES AND

BSA -203A
MEASURES

Following are 10 internal control failures related to the revenues and cash collection
processes:

1.  __D__ A customer ordered 12 boxes of your product (total of 144 items) for express
shipment. Your data entry clerk inadvertently entered 12 individual items.
2.  __Q__ You enter sales and accounts receivable data in batches at the end of each
week. Several problems have resulted recently as a result of invoices being recorded to
the wrong customer account.
3.  __F__ In an effort to boost sales, you obtain some unissued (blank) shipping reports
and create a dozen fictitious shipments. You submit these documents to the billing
department for invoicing.
4.  __G__ Checks are received by the mail room and then forwarded to the accounts
receivable department for recording. The accounts receivable clerk holds the checks
until the proper customer account has been identified and reconciled.
5. __P__ Several shipping reports have been misplaced en route to the billing
department from the shipping department.
6.  __H__ Several sales transactions were not invoiced within the same month as the
related shipment.
7. __C__ A sales clerk entered a nonexistent date in the computer system. The system
rejected the data and the sales were not recorded.
8.  __A__ Upon entering sales orders in your new computer system, a sales clerk
mistakenly omitted customer numbers from the entries.
9.  __O__ A computer programmer altered the electronic credit authorization function
for a customer company owned by the programmer’s cousin.
10. __N__ Customer orders were lost in the mail en route from the sales office to the
accounting department (located at the company’s headquarters).

Required:
From the list that follows, select one internal control would be most effective in the
prevention of each listed failure. Indicate the letter of the control next to each failure.
Letters should not be used more than once, and some letters may not be used at all.
a. Preformatted data entry screens
b. Prenumbered documents
c. Programmed edit checks
d. 100 percent check for matching of customer orders and sales orders
e. 100 percent check for matching of sales orders, pick list, and packing slips
f. 100 percent check for matching of sales orders and invoices
g. 100 percent check for matching of deposit slip and customer check
h. Prompt data entry immediately upon receipt of customer order
i. Customer verification
j. Independent authorization for shipments
k. Independent authorization for billing
l. Reasonableness check
m. Hash totals
n. Data backup procedures
o. Program change controls
p. Sequence verification
q. Periodic confirmation of customer account balances