Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate internal control over the invoicing function allows goods to be shipped that are not invoiced. The inadequate controls could cause an
A.Overstatement of revenues, receivables, and inventory.
B.Overstatement of revenues and receivables and an understatement of inventory.
C.Understatement of revenues and receivables and an overstatement of inventory.
D.Understatement of revenues, receivables, and inventory.
Understatement of revenues and receivables and an overstatement of inventory.
If goods are shipped before the sales are invoiced, inventory will not be credited for the shipments, thus overstating inventory. Moreover, if the accounting function does not receive copies of the invoices, sales and receivables will not be recorded, with the consequent understatement of those accounts.