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After assessing internal controls are being effective in the sales and collection cycle, the auditor can...

After assessing internal controls are being effective in the sales and collection cycle, the auditor can assume that internal controls will be effective at each of the client’s other transaction cycles.

True or False

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Answer #1

False.

There are various transaction cycles in a business namely:

sales cycle

Purchase cycle

payroll cycle

financing cycle....etc.

Effective internal controls in sales and collection cycle does not guarantee that internal controls in other cycles will be effective.

This is partly because there are different accounts involved for different cycles.

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