Question

Assume that a company has a control deficiency regarding the processing of cash receipts. Reconciliation of cash accounts by a competent individual otherwise independent of the cash function might make the likelihood of a significant misstatement due to the control deficiency remote. In this situation, reconciliation may be referred to as what type of control?

Answer 1

The type of control that involves the reconciliation of cash accounts by a competent individual independent of the cash function is known as detective control.

Step-by-step explanation:

The type of control that involves the reconciliation of cash accounts by a competent individual independent of the cash function is known as detective control. This control helps identify and detect errors or irregularities in the cash receipts process. By reconciling cash accounts, any discrepancies or misstatements can be identified and corrective actions can be taken.