QUESTION: 25

Company M has lost 25% of its revenue in the last three months due to bad debts. One of the receivables written off was from a long standing customer and the other three were from new customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.
Which of the following internal controls should be put in place to try and prevent further bad debts?

A credit check should be carried out on each new customer.
Credit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.
Two sales staff must authorise new customers and sign a form stating that they have done so.
An aged analysis of customer balances must be reviewed every month.
As soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced.

Answer(s): A,D,E

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QUESTION: 26

H Ltd is a logistics company which is likely to be seeking a Stock Exchange listing shortly. The directors wish to strengthen the company's internal controls.
Which of the following statements are valid?

The Board should take direct responsibility itself for all organisational control and avoid delegating.
The Board should ensure that the internal accounting system provides accurate and relevant information.
The Board should ensure that there is regular assessment of the financial impact of contingencies.
The Board should communicate organisational policies only to members of staff who are part of the management team.
Internal Audit should be used to check on the detailed operation of controls in the operating departments.

Answer(s): B,C,E

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QUESTION: 27

P Ltd, a service company, is seeking to recruit engineers to work in its maintenance division.
Which TWO of the following suggestions will be most likely to help prevent fraud when recruiting the engineers?

Checking that the engineers have previous experience in a similar business.
Checking that the engineers do not belong to a union.
Checking that the engineers have a professional engineering qualification.
Taking up references from previous employers.
Having a defined fraud policy statement that includes recruitment issues.

Answer(s): D,E

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QUESTION: 28

Company H operates a fleet of lorries. The Internal Auditor recently conducted an investigation into the transport needs of the company. Their report recommended that the lorries be disposed of, the drivers made redundant, and the distribution of the company's products be outsourced. The type of investigation carried out by the Internal Auditor is best described as a:

Compliance Audit
Economy Audit
Efficiency Audit
Effectiveness Audit

Answer(s): D

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QUESTION: 27

QUESTION: 28

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