Question

To determine whether credit controls are inconsistently applied, preventing valid sales to creditworthy customers, the internal auditor should:

1) trace postings on the accounts receivable ledger
2) analyze collection rates and credit histories
3) compare credit histories for those receiving credit and for those denied credit
4) confirm current accounts receivable

Answer 1

To determine whether credit controls are inconsistently applied, an internal auditor should trace postings on the accounts receivable ledger, analyze collection rates and credit histories, compare credit histories for those receiving credit and those denied credit, and confirm current accounts receivable.

Step-by-step explanation:

To determine whether credit controls are inconsistently applied, preventing valid sales to creditworthy customers, the internal auditor should:

1. Trace postings on the accounts receivable ledger: This will help identify any inconsistencies or errors in the recording of credit transactions.
2. Analyze collection rates and credit histories: By examining collection rates and credit histories, the auditor can identify trends or patterns that may indicate inconsistencies in credit controls.
3. Compare credit histories for those receiving credit and for those denied credit: This will help determine if there is a discrepancy in how credit is granted, indicating inconsistent application of credit controls.
4. Confirm current accounts receivable: This step ensures that the accounts receivable balance is accurate and that all valid sales have been recorded.