Question

A firm' s sales procedure involves preparing sales invoices based on shipping documents; posting the sales amounts to accounts receivable records; and posting quantities billed to the inventory records. Due to control weaknesses in the procedure, certain goods that are shipped may not be reflected in the sales invoices. The exposure from this risk can result in:

Answer 1

Answer: understatement of revenues and receivables and over statement of inventory

Step-by-step explanation:

Control weakness simply refers to the failure by a company to implement the internal controls. Based on the information given, the exposure from this risk can result in understatement of revenues and receivables and over statement of inventory.

There'll be understatement of revenue and receivables since sales is not recorded while the inventory will be overstated.