D is corrent because proper control over purchases would require that ordered goods only be shipped to authorized locations; proper control would also determine that all ordered goods had been received by the firm. If purchase orders are issued by Judd and the purchases are never received, there is an internal control condition over the purchase orders. All purchase orders should be accounted for (prenumbered) and followed up to assure receipt of orders that are issued.
A is incorrect because purchase requisitions are internal documents which are prepared by user departments and sent to the purchasing department for action.
B is incorrect because the failure to detect purchase orders that were not received has nothing to do with cash receipts.
C is incorrect because perpetual inventory records cannot be relied upon to detect the nonreceipt of purchase orders (i.e., perpetual inventory records are only activated once the goods are received).
|
