ICAEW ARF · Chapter 5 · Question 1 of 11
Which control best reduces the risk of sales being made to customers who are unlikely to pay?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Credit limits are set for each customer and checked before an order is accepted
Explanation
Setting and checking credit limits before accepting orders prevents the company from supplying customers who are a poor credit risk. Sequential numbering supports completeness, statements help detect errors in customer accounts, and signed despatch notes provide evidence of delivery. None of these addresses creditworthiness before the sale.
More Controls over revenue and purchases MCQs
- Q3A company sends statements to all credit customers each month. Which risk does this control mainly address?
- Q4Which control best reduces the risk that credit notes are used to conceal the theft of customer receipts?
- Q5At a client, the sales clerk who raises sales invoices can also change the prices held in the system's standing data. What is the main…
- Q6In a purchases system, which three documents are typically matched before a supplier invoice is approved for payment?
- Q7Which control best ensures that the company records liabilities only for goods it has actually received?