End of Chapter Questions (CH 8,9,10,12)

input controls such as field check, validity check, limit check, and reasonableness check are useful in IT systems of purchasing processes to lessen which of the following risks? a. unauthorized access b. invalid data entered by vendors c. repudiation of purchase transactions d. virus and worm attacks

b. invalid data entered by vendors

Which of the following statements is true? a. routine transactions are recorded in the general journal b. nonroutine transactions are entered in the general journal c. nonroutine transactions are recorded in a subsidiary ledger d. nonroutine transactions are recorded in a special journal

b. nonroutine transactions are entered in the general journal

in a manual system with proper segregation of duties, an employee in the general ledger department should only: a. authorize posting to the general ledger b. post transactions to the general ledger c. reconcile the subsidiary ledger to the general ledger d. post transactions to the subsidiary ledger

b. post transactions to the general ledger

when a company sells items over the Internet, it is usually called e-commerce. there are many IT risks related to Internet sales. the risk of invalid data entered by a customer would be a(n): a. availability risk b. processing integrity risk c. security risk d. confidentiality risk

b. processing integrity risk

for proper segregation of duties in cash disbursements, the person who signs checks also: a. reviews the monthly bank reconciliation b. returns the checks to accounts payable c. is denied access to the supporting documents d. is responsible for mailing the checks

b. returns the checks to accounts payable

one of the most critical controls to prevent theft of inventory purchased is to: a. require authorization of the purchase requisition b. segregate inventory custody from inventory record keeping c. compare the PO, receiving report, and invoice d. segregate the authorization of purchases from the inventory record keeping

b. segregate inventory custody from inventory record keeping

within accounts payable, to ensure that each voucher is submitted and paid only once, each invoice approved to be paid should be: a. supported by a receiving report b. stamped "paid" by the check signer c. prenumbered and accounted for d. approved for authorized purchases

b. stamped "paid" by the check signer

regarding subsidiary ledgers and general ledger control accounts, which of the following is not true? a. total balances in subsidiary ledger should always equal the balance in the corresponding general ledger account b. the general ledger maintains details of subaccounts c. control is enhanced by separating the subsidiary ledger from the general ledger d. reconciling a subsidiary ledger to the general ledger can help to detect errors or fraud

b. the general ledger maintains details of subaccounts

within cash disbursements, all of the following should be true before a check is prepared, except that: a. the purchase order, receiving report, and invoice have been matched b. the purchased goods have been used c. sufficient cash is available d. the invoice discount date or due date is imminent

b. the purchased goods have been used

internal control is strengthened by the use of a blind purchase order, upon which the quantity of goods ordered is intentionally left blank. this blind copy is used in which department? a. the department that initiated the purchase request b. the receiving department c. the purchasing department d. the accounts payable department

b. the receiving department

which of the following is not an independent verification related to cash disbursements? a. the cash disbursements journal is reconciled to the general ledger b. the stock of unused checks should be adequately secured and controlled c. the bank statement is reconciled on a monthly basis d. the accounts payable subsidiary ledger is reconciled to the general ledger

b. the stock of unused checks should be adequately secured and controlled

if a company does prepare an aging of accounts receivable, which of the following accounts is most likely to be misstated? a. sales revenue b. accounts receivable c. sales returns and allowances d. allowance for uncollectible accounts

d. allowance for uncollectible accounts

the purchase of fixed assets is likely to require different authorization processes than the purchase of inventory. Which of the following is not likely to be part of the authorization of fixed assets? a. specific authorization b. inclusion in the capital budget c. an investment analysis or feasibility analysis of the purchase d. approval of the depreciation schedule

d. approval of the depreciation schedule

which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchase transactions? a. is an authorized PO required before the receiving department can accept a shipment or the accounts payable department can record a voucher? b. are prenumbered purchase requisitions used, and are they subsequently matched with vendor invoices? c. is there a regular reconciliations of the inventory records with the file of unpaid vouchers? d. are prenumbered POs, receiving report, and vouchers used, and are the entire sequences accounted for?

d. are prenumbered POs, receiving report, and vouchers used, and are the entire sequences accounted for?

which of the following controls is not normally performed in the accounts payable department? a. the vendor's invoice is matched with the related receiving report b. vendor invoices are selected for payment c. asset and expense accounts to be recorded are assigned d. unused purchase orders and receiving reports are accounted for

d. unused purchase orders and receiving reports are accounted for

which of the given departments will immediately adjust the vendor account for each purchase transaction so that the company will know the correct amount owed to the vendor? a. purchasing b. receiving c. accounts payable d. shipping

c. accounts payable

internal control problems would be likely to result if a company's payroll department supervisor was also responsible for: a. reviewing authorization forms for new employees b. comparing the payroll register with the batch transmittal data c. authorizing charges in employee pay rates d. hiring subordinates to work in the payroll department

c. authorizing charges in employee pay rates

which of the following statements about payroll and fixed asset process is true? a. both have only routine processes b. both have only nonroutine processes c. both have routine and nonroutine processes d. payroll has only routine processes, while fixed asset has only nonroutine processes

c. both have routine and nonroutine processes

the source document that initiates the recording of the return and the adjustment to the customer's credit status is the: a. pick list b. sales journal c. credit memorandum d. sales invoice

c. credit memorandum

which of the following IT systems is designed to avoid the document matching process and is an "invoiceless system"? a. computer-based matching system b. electronic data interchange c. evaluated receipt settlement (ERS) d. Microsoft Dynamic GP

c. evaluated receipt settlement (ERS)

the purpose of tracing sales invoices to shipping documents would be to provide evidence that: a. shipments to customers were properly invoiced b. no duplicate shipments or billings occurred c. goods billed to customers were shipped d. all prenumbered sales invoices were accounted for

c. goods billed to customers were shipped

which of the following is not an advantage of fixed asset software systems when compared with spreadsheets? a. better ability to handle nonfinancial data such as asset location b. easier to apply different depreciation policies to different assets c. manual processes to link to the general ledger d. expanded opportunities for customized reporting

c. manual processes to link to the general ledger

which of the following is not an independent check within payroll processes? a. time sheets are reconciled with production records b. time sheets are reconciled with the payroll register c. paychecks are prepared on prenumbered checks d. the payroll register is reconciled with the general ledger

c. paychecks are prepared on prenumbered checks

an IT system that uses touch screens, bar-coded products, and credit card authorization during the sale is called a(n) a. electronic data interchange system b. e-commerce system c. point of sale system d. e-payables system

c. point of sale system.

in a system of proper internal controls, the same employee should not be allowed to: a. sign checks and cancel the supporting voucher package b. receive goods and prepare the related receiving report c. prepare voucher packages and sign checks d. initiate purchase requisitions and inspect goods received

c. prepare voucher packages and sign checks

an example of an independent verification in the sales process is: a. preparation of packing slips on prenumbered forms b. initialing the sales order c. proof of recorded dates, quantities, and prices on an invoice d. physical controls in record storage areas

c. proof of recorded dates, quantities, and prices on an invoice

which of the following would represent proper segregation of duties? a. the employee who has custody of cash also does accounts receivable record keeping b. the employee who has custody of cash completes bank reconciliation c. the employee who opens mail containing checks prepares a list of checks received d. the employee who opens mail containing checks records transactions in the general ledger

c. the employee who opens mail containing checks prepares a list of checks received

the purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the: a. authorization of transactions from the custody of related assets b. operational responsibility from the record-keeping responsibility c. human resources function from the controllership function d. administrative controls from the internal accounting controls

a. authorization of transactions from the custody of related assets

when a company sells items over the Internet, there are many IT risks related to Internet sales. the risk of hardware and software failures that prevent website sales would be a(n): a. availability risk b. processing integrity risk c. security risk d. confidentiality risk

a. availability risk

a manager suspects that certain employees are ordering merchandise for themselves over the internet without recording the purchase or receipt of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and related vouchers. To trace whether this is actually happening, it would be best to begin tracing from the: a. cash disbursements b. approved vouchers c. receiving reports d. vendors' invoices

a. cash disbursements

within the revenue processes, a signed approval of sales order indicates all of the following except: a. date of delivery b. sale to an accepted customer c. approval of the customer's credit d. correct sales price

a. date of delivery

the document prepared when purchased items are returned is a(n): a. debit memo b. invoice c. receiving report d. sales journal

a. debit memo

which of the following is not a part of "adequate documents and records" for fixed assets? a. fixed asset journal b. fixed asset subsidiary journal c. purchase order d. fixed asset tags

a. fixed asset journal

which of the following departments or positions most likely would approve changes in pay rates and deductions from employee salaries? a. human resources b. treasurer c. controller d. payroll

a. human resources

which of the following procedures would be most useful in determining the effectiveness of a company's internal controls regarding the existence or occurrence of payroll transactions? a. observe the segregation of duties concerning personnel responsibilities and payroll disbursement b. inspect evidence of accounting for prenumbered payroll checks c. recompute the payroll deductions for employee fringe benefits d. verify the preparation of the monthly payroll account bank reconciliation

a. observe the segregation of duties concerning personnel responsibilities and payroll disbursement

for a given pay period, the complete listing of paychecks for the pay period is a: a. payroll register b. payroll ledger c. payroll journal d. paymaster

a. payroll register

which of the following statements regarding the authorization of general ledger posting is not true? a. posting to the general ledger always requires specific authorization b. user IDs and passwords can serve as authorization to post transactions to the general ledger c. a journal voucher serves as authorization for manual systems d. as IT systems become more automated, the authorization of general ledger posting is moved to lower levels of employees

a. posting to the general ledger always requires specific authorization

under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the: a. receiving clerk b. sales clerk c. purchasing clerk d. inventory control clerk

a. receiving clerk

which of the following internal controls would help prevent overpayment to a vendor or duplicate payment to vendor? a. review and cancellation of supporting documents after issuing payment b. requiring the check signer to mail the payment directly to the vendor c. review of the accounts where the expenditure transaction has been recorded d. approving the purchase before the goods are ordered from the vendor

a. review and cancellation of supporting documents after issuing payment

which of the following reviews would be most likely to indicate that a company's property, plant, and equipment accounts are not understated? a. review of the company's repairs and maintenance expense accounts b. review of supporting documentation for recent equipment purchases c. review and recomputation of the company's depreciation expense accounts d. review of the company's miscellaneous revenue account

a. review of the company's repairs and maintenance expense accounts

the purpose of tracing shipping documents to prenumbered sales invoices would be to provide evidence that: a. shipments to customers were properly invoiced b. no duplicate shipments or billings occurred c. goods billed to customers were shipped d. all prenumbered sales invoices were accounted for

a. shipments to customers were properly invoiced

immediately upon receiving checks from customers in the mail, a responsible employee working in an environment of adequate internal control should prepare a listing of receipts and forward it to the company's cashier. a copy of this cash receipts listing should also be sent to the company's: a. treasurer for comparison with the monthly bank statement b. internal auditor for investigation of any unusual transactions c. accounts receivable clerk for updating of the accounts receivable subsidiary ledger d. bank for comparison with deposit slips

a. treasurer for comparison with the monthly bank statement

in meeting the control objective of the safeguarding of assets, which departments should be responsible for distribution of paychecks and custody of unclaimed paychecks, respectively? a. treasurer, treasurer b. payroll, treasurer c. treasurer, payroll d. payroll, payroll

a. treasurer, treasurer

which of the following is not typically an are of measure in a balanced scorecard? a. vendor b. customer c. financial d. learning and growth

a. vendor

which of the following is most likely to be effective in deterring fraud by upper-level managers? a. internal controls b. an enforced code of ethics c. matching documents prior to payment d. segregating custody of inventory from inventory record keeping

b. an enforced code of ethics

a payroll voucher: a. authorizes an employee paycheck to be written b. authorizes the transfer of cash from a main operating account to a payroll account c. authorizes the transfer of cash from a payroll account to a main operating account d. authorizes the paymaster to distribute paychecks

b. authorizes the transfer of cash from a main operating account to a payroll account

for proper segregation of duties, the department that should authorize new employees for payroll would be: a. payroll b. human resources c. cash disbursement d. general ledger

b. human resources

a company's internal control policies may mandate the distribution of paychecks by an independent paymaster in order to determine that: a. payroll deductions are properly authorized and computed b. pay rates are properly authorized and separate from the operating function c. each employee's paycheck is supported by an approved time sheet d. employees included in the period's payroll register actually exist and are currently employed

d. employees included in the period's payroll register actually exist and are currently employed

which of the following statements about reporting is true? a. external users need detailed, rather than summarized, information b. all reports, internal and external, are derived only from general ledger data c. all organizations need similar internal reports d. internal reports are tailored to the specific needs of each management level and function

d. internal reports are tailored to the specific needs of each management level and function

which of the following questions would e least likely to appear on an internal control questionnaire regarding the initiation and execution of new property, plant, and equipment purchases? a. are the requests for repairs approved by someone higher than the department initiating the request? b. are prenumbered purchase orders used and accounted for? c. are purchase requisitions reviewed for consideration of soliciting competitive bids? d. is access to the assets restricted and monitored?

d. is access to the assets restricted and monitored?

which of the following is not a document that is part of the cash collections process? a. remittance advice b. cash receipts journal c. bank deposit slip d. packing slip

d. packing slip

personnel who work in the receiving area should complete all of the following processes except: a. counting the goods received b. inspecting goods received for damage c. preparing a receiving report d. preparing an invoice

d. preparing an invoice

which of the following is not a method of unethically inflating sales revenue? a. channel stuffing b. holding sales open c. premature recognition of contingent sales d. promotional price discounts

d. promotional price discounts

the use of electronic data interchange (EDI) to conduct sales electronically has both risks and benefits. which of the following is a benefit of EDI rather than a risk? a. incomplete audit trail b. repudiation of sales transactions c. unauthorized access d. shorter inventory cycle time

d. shorter inventory cycle time

the term "ghost employee" means that: a. hours worked has been exaggerated by an employee b. false sales have been claimed to boost commission c. overtime hours have been inflated d. someone who does not work for the company receives a paycheck

d. someone who does not work for the company receives a paycheck

within the purchasing process, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing process? a. the invoice b. the receiving report c. the purchase order d. the purchase requisition

d. the purchase requisition

to ensure that all credit sales transactions are recorded, which of the following controls would be most effective? a. on a monthly basis, the accounting department supervisor reconciles the accounts receivable subsidiary ledger to the accounts receivable control account b. the supervisor of the accounting department investigates any account balance differences reported by customers c. the supervisor of the billing department sends copies of approved sales orders to the credit department for comparison of authorized credit limits and current customer balances d. the supervisor of the billing department matches prenumbered shipping documents with entries recorded in the sales journal

d. the supervisor of the billing department matches prenumbered shipping documents with entries recorded in the sales journal

an integrated IT system of payroll and human resources may have extra risks above those of a manual system. Passwords and access logs are controls that should be used in these integrated systems to lessen the risk of: a. hardware failures. b. erroneous data input. c. payroll data that does not reconcile to time cards. d. unauthorized access to payroll data.

d. unauthorized access to payroll data.