Chapter 12 - ACCT316

Which of the following controls would be most effective in mitigating the risk of inventory theft? a. Reconciling shipping documents to sales orders, picking lists and packing slips. b. Separating the functions of shipping and billing c. Documentation of all transfers of inventory between employees d. Use of lockboxes

Documentation of all transfers of inventory between employees

Which of the following techniques is the most efficient way to process customer payments and update accounts receivable? a. EFT b. UPIC c. FEDI d. ACH

FEDI

Which of the following types of fraud requires access to the accounts receivable master file? a. Lapping b. Kiting c. Theft of inventory d. None of the above

Lapping

Which of the following provides a means to both improve the efficiency of processing customer payments also enhance control over those payments? a. CRM b. lockboxes c. shipping order d. sales invoice

Lockboxes

For good internal control in an ERP system, sales staff should be permitted to: a. Adjust customer credit limits b. Issue credit memos c. Both of the above d. Neither of the above

Neither of the above

For effective internal control, which of the following duties can the person who handles customer payments also perform? a. Issue credit memos b. Reconcile the bank account c. Maintain accounts receivable d. All of the above e. None of the above

None of the above

Which of the following violates proper segregation of duties? a. The same person maintains both accounts receivable and accounts payable. b. The same person approves sales orders that exceed a customer's credit limit and processes and reconciles the bank account. c. The same person handles customer payments and has access to blank checks. d. All of the above combinations violate proper segregation of duties. e. None of the above combinations violate proper segregation of duties.

None of the above combinations violate proper segregation of duties.

The integrated database underlying an ERP system results in which of the following general threats to the revenue cycle? a. inaccurate or invalid master data b. unauthorized disclosure of sensitive information c. loss or destruction of data d. all of the above

all of the above

Which of the following is an example of the type of fraud referred to as misappropriation of assets? a. embezzlement b. lapping c. inventory theft d. all of the above e. none of the above

all of the above

Which of the following revenue cycle activities can potentially be eliminated by technology? a. sales order entry b. shipping c. billing d. cash collections

Billing

For good internal control over customer remittances, the mailroom clerk should separate the checks from the remittance advices and send the customer payments to which department? a. billing b. accounts receivable c. cashier d. sales

Cashier

Which activity is part of the sales order entry process? a. setting customer credit limits b. preparing a bill of lading c. checking customer credit d. approving sales returns

Checking customer credit

For good internal control, who should approve credit memos? a. credit manager b. sales manager c. billing manager d. controller

Credit manager

Which of the following pairs of duties combines the functions of custody and authorization in a manner that would allow an employee to conceal the theft of a customer's payment? a. Handling cash receipts plus maintaining accounts receivable b. Writing checks plus reconciling the bank statement c. Handling cash receipts plus issuing credit memos d. All of the combinations involve custody and authorization in a manner that would enable an employee to conceal theft of a customer's payment e. None of the combinations involve the functions of custody and authorization in a manner that would enable an employee to conceal theft of a customer's payment

Handling cash receipts plus issuing credit memos

Which method is most likely used when a company offers customers discounts for prompt payment? a. open-invoice method b. balance-forward method c. accounts receivable aging method d. cycle billing method

Open-invoice method

Which document often accompanies merchandise shipped to a customer? a. picking ticket b. packing slip c. credit memo d. sales order

Packing slip

Which document is used to authorize the release of merchandise from the inventory control [warehousing] to shipping? a. picking ticket b. packing slip c. shipping order d. sales invoice

Picking ticket

Which of the following combinations of duties can the same employee perform without violating the principle of segregation of duties? a. Shipping inventory and billing customers b. Issuing credit memos and maintaining accounts receivable c. Taking customer orders and checking inventory availability d. All three of the listed combinations can be performed by the same person without violating the principle of segregation of duties e. None of the three listed combinations should be performed by the same person because all three combinations violate the principle of segregation of duties

Taking customer orders and checking inventory availability

The CEO is concerned about the possibility of employees stealing inventory. In the formal language used for risk analysis, theft of inventory is referred to as a(n): a. risk b. exposure c. expected loss d. threat e. None of the above

Threat

Which of the following procedures, by itself, is most effective at preventing employees from stealing cash? a. Restrictively endorsing all checks from customers upon receipt b. Having someone who has no access to cash reconcile the bank accounts c. Sending monthly statements to customers d. Using lockboxes for customer remittances e. Creating invoices so that the bottom portion is to be returned as a remittance advice

Using lockboxes for customer remittances