Question

The following is a list of possible errors or fraud (1 through 8) involving sales and controls (a. through k.) that may prevent or detect the errors or fraud:

Possible errors or Fraud
1. Goods are removed from inventory for unauthorized orders.
2. Credit sales are made to customers with unsatisfactory credit ratings.
3. Invoices are sent to co-participants in a fraudulent scheme, and sales are recorded for fictitious transactions.
4. Goods shipped to customers do not agree with goods ordered by customers.
5. Invoices are sent for shipped goods, but are not recorded in the sales journal.
6. Invoices are sent for shipped goods, and are recorded in the sales journal, but are not posted to any customer accounts.
7. Invoices for goods sold are posted to incorrect customer accounts.
8. Invalid transactions granting credit for sales returns are recorded.

Answer 1

To reassure potential buyers faced with imperfect information, sellers can offer warranties, obtain third-party certifications, provide detailed product information, build a reliable brand reputation, and offer free samples or trials.

Step-by-step explanation:

Many economic transactions occur in situations of imperfect information, where buyers or sellers have incomplete knowledge about the products or services involved. This asymmetric information can lead to issues such as declines in product prices or quantities sold due to the uncertainty. To overcome these challenges, sellers can utilize several strategies to reassure potential buyers:

Warranties or money-back guarantees offer assurances against defects or dissatisfaction.

Obtaining certifications or endorsements from reputable third parties can enhance credibility.

Providing clear and detailed product information, including honest disclosure of any limitations or defects.

Building a strong brand reputation through consistent quality and good customer service.

Offering free samples or trials to demonstrate product quality.

These mechanisms help to establish trust and can facilitate mutually beneficial transactions despite imperfect information.