If a company’s control risk is low, the auditor needs to gather evidence on the operating effectiveness of the controls.Requireda. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness.b. Briefly indicate the audit implication; that is, how would direct tests of account balances need to be modified if the auditor finds that the control procedure is not working as planned?Controls:1. Credit approval by the credit department is required before salespersons accept orders of more than $5,000 and for all customers who have a past-due balance higher than $3,000.2. All merchandise receipts are recorded on prenumbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips.3. Payments for goods received are made only by the accounts payable department on receipt of a vendor invoice, which is then matched for prices and quantities with approved purchase orders and receiving slips.4. The accounts receivable bookkeeper is not allowed to issue credit memos or to approve the write-off of accounts.5. Cash receipts are opened by a mail clerk, who prepares remittances to send to accounts receivable for recording. The clerk prepares a daily deposit slip, which is sent to the controller. Deposits are made daily by the controller.6. Employees are added to the payroll master file by the payroll department only after receiving a written authorization from the personnel department.7. The only individuals who have access to the payroll master file are the payroll department head and the payroll clerk responsible for maintaining the payroll file. Access to the file is controlled by computer passwords.8. Edit tests built into the computerized payroll program prohibit the processing of weekly payroll hours in excess of 55, and the payment to an employee for more than three different job classifications during a one-week period.9. Credit memos are issued to customers only on the receipt of merchandise or the approval of the sales department for adjustments.10. A salesperson cannot approve sales return or price adjustment that exceeds 5 percent of the cumulative sales for the year for any one customer. The divisional sales manager must approve any subsequent approvals of adjustments for such a customer.5-68 (Tests of Controls) If a companyâs control risk is low, theauditor needs to gather evidence on the operating effectiveness of thecontrols.Requireda. For each of the following control activities, indicate the auditprocedure the auditor would use to determine its operatingeffectiveness.b. Briefly indicate the audit implication; that is, how would directtests of account balances need to be modified if the auditor finds thatthe control procedure is not working as planned?Controls:1. Credit approval by the credit department is required beforesalespersons accept orders of more than $5,000 and for all customers whohave a past-due balance higher than $3,000.2. All merchandise receipts are recorded on prenumbered receiving slips.The controllerâs department periodically accounts for the numericalsequence of the receiving slips.3. Payments for goods received are made only by the accounts payabledepartment on receipt of a vendor invoice, which is then matched forprices and quantities with approved purchase orders and receiving slips.4. The accounts receivable bookkeeper is not allowed to issue creditmemos or to approve the write-off of accounts.5. Cash receipts are opened by a mail clerk, who prepares remittances tosend to accounts receivable for recording. The clerk prepares a dailydeposit slip, which is sent to the controller. Deposits are made dailyby the controller.6. Employees are added to the payroll master file by the payrolldepartment only after receiving a written authorization from thepersonnel department.7. The only individuals who have access to the payroll master file arethe payroll department head and the payroll clerk responsible formaintaining the payroll file. Access to the file is controlled bycomputer passwords.8. Edit tests built into the computerized payroll program prohibit theprocessing of weekly payroll hours in excess of 55, and the payment toan employee for more than three different job classifications during aone-week period.9. Credit memos are issued to customers only on the receipt ofmerchandise or the approval of the sales department for adjustments.10. A salesperson cannot approve sales return or price adjustment thatexceeds 5 percent of the cumulative sales for the year for any onecustomer. The divisional sales manager must approve any subsequentapprovals of adjustments for such a customer.

If a company’s control risk is low, the auditor needs to gather evidence on the operatingeffectiveness of the controls.Requireda. For each of the following control activities, indicate the audit…

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• A. Depreciation Expense 100 Accumulated Depreciation 100
•  B. Depreciation Expense 1200 Accumulated Depreciation 1200
•  C. Accumulated Depreciation 1200 Depreciation Expense 1200
•  D. Accumulated Depreciation 100 Depreciation Expense 100

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If a firm is willing to supply the 1,000th unit of a good at a price of $23 or more, we know that $23 is

the 

Group of answer choices

only price for which the seller is willing to sell this unit of the good.

highest price the seller hopes to realize for this output.

minimum price the seller must receive to produce this unit.

price that sets the marginal benefit equal to the price.

average price of all the prices the seller could charge.

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If a firm is found guilty of cannibalization in a court of law, then it is judged to have taken unfair advantage of its competitors. Thus, cannibalization is dealt with by society through the antitrust laws.

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