Smith Manufacturing Company’s accounts receivable clerk has a friend who is also a customer of Smith Manufacturing. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to
A. prenumber and account for all credit memorandums.
B. require receiving reports that provide evidence of returned inventory items to support all credit memorandums before they are approved.
C. have independent sales and accounts receivable departments.
D. mail monthly statements to customers.
Answer:B
Smith Manufacturing Company’s accounts receivable clerk has a friend who is also a customer of Smith Manufacturing. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to
A. prenumber and account for all credit memorandums. B. require receiving reports that provide evidence of returned inventory items to support all credit memorandums before they are approved. C. have independent sales and accounts receivable departments. D. mail monthly statements to customers.