ACCA AA · Chapter 8 · Question 4 of 12
Which control would best address the objective that goods are only supplied to customers with acceptable credit ratings?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Credit checks on new customers and review of credit limits before orders are accepted
Explanation
Credit checks and credit limits stop orders being accepted from customers who may not pay, reducing irrecoverable debts. Sequential numbering and matching of dispatch notes address completeness and accuracy of invoicing, and ledger reconciliations address accurate recording rather than credit risk.
More Internal control systems MCQs
- Q6What is the main purpose of matching a supplier invoice to the related purchase order and goods received note before payment?
- Q7Which control would best prevent fictitious employees from being added to the payroll?
- Q8Which of the following controls would be most effective in reducing the risk of theft of high-value inventory from a warehouse?
- Q9Which of the following bank reconciliation procedures represents the strongest control?
- Q10Under ISA 265, how must the auditor communicate significant deficiencies in internal control identified during the audit?