Study Unit 7

Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the Receiving department. Purchasing agent. Department that initiated the requisition. Accounts payable department.

Receiving department.

Operating control of the check-signing machine normally should be the responsibility of the Legal counsel. Treasury function. Internal audit function. General accounting function.

Treasury function.

When an entity uses a trust company as custodian of its trading securities, the possibility of concealing fraud most likely will be reduced if the Securities are registered in the name of the trust company rather than the entity itself. Interest and dividend checks are mailed directly to an entity employee who is authorized to sell securities. Trust company places the securities in a bank safe-deposit vault under the custodian's exclusive control. Trust company has no direct contact with the entity employees responsible for maintaining investment accounting records.

Trust company has no direct contact with the entity employees responsible for maintaining investment accounting records.

The authority to accept incoming goods in receiving should be based on a(n) Materials requisition. Approved purchase order. Vendor's invoice. Bill of lading.

Approved purchase order.

Which of the following activities performed by a department supervisor most likely would help in the prevention or detection of a payroll fraud? Distributing paychecks directly to department employees. Setting the pay rate for departmental employees. Approving a summary of hours each employee worked during the pay period. Hiring employees and authorizing them to be added to payroll.

Approving a summary of hours each employee worked during the pay period.

In a well-designed internal control system, employees in the same department most likely would approve purchase orders, and also Reconcile the open invoice file. Authorize requisitions of goods. Inspect goods upon receipt. Negotiate terms with vendors.

Negotiate terms with vendors.

Which of the following are essential elements of the audit trail in an electronic data interchange (EDI) system? Trading partner security and mailbox codes. Message directories and header segments. Contingency and disaster recovery plans. Network and sender-recipient acknowledgments.

Network and sender-recipient acknowledgments.

In the audit of which of the following types of profit-oriented enterprises is the auditor most likely to place special emphasis on testing the controls over proper classification of payroll transactions? A manufacturing organization. A wholesaling organization. A service organization. A retailing organization.

A manufacturing organization

Which of the following indicates a potential for fraud in the payroll computer system? Other departments have limited access to the payroll department. Human resources can make changes in the personnel master file. Each employee is issued an identification card used to initiate timekeeping. A production manager can make changes in the personnel master file.

A production manager can make changes in the personnel master file.

Which of the following activities is most likely to prevent the improper disposition of equipment? The use of serial numbers to identify equipment that could be sold. Periodic comparison of removal work orders with authorizing documentation. A periodic analysis of the scrap sales and the repairs and maintenance accounts. A segregation of duties between those authorized to dispose of equipment and those authorized to approve removal work orders.

A segregation of duties between those authorized to dispose of equipment and those authorized to approve removal work orders.

Which of the following situations most likely could lead to an embezzlement scheme? Access to blank checks and signature plates is restricted to the cash disbursements bookkeeper who personally reconciles the monthly bank statement. Each vendor invoice is matched with the related purchase order and receiving report by the vouchers payable clerk who personally approves the voucher for payment. The accounts receivable bookkeeper receives a list of payments prepared by the cashier and personally makes entries in the customers' accounts receivable subsidiary ledger. Vouchers and supporting documentation are examined and then canceled by the CFO who personally mails the checks to vendors.

Access to blank checks and signature plates is restricted to the cash disbursements bookkeeper who personally reconciles the monthly bank statement.

Which control is most likely to give the greatest assurance that securities held as investments are safeguarded? Access to securities requires the signatures and presence of two designated officials. There is no access to securities between year-end and the date of the auditor's security count. Proceeds from the sale of investments are received by an employee who does not have access to securities. Investment acquisitions are authorized by a member of the board of directors before execution.

Access to securities requires the signatures and presence of two designated officials.

Which of the following internal control activities is not usually performed in the vouchers payable department? Approving vouchers for payment by having an authorized employee sign the vouchers. Indicating the asset and expense accounts to be debited. Accounting for unused prenumbered purchase orders and receiving reports. Matching the vendor's invoice with the related receiving report.

Accounting for unused prenumbered purchase orders and receiving reports.

Which of the following is an essential element of the audit trail in an electronic data interchange (EDI) system? Activity logs that indicate failed transactions. Encrypted hash totals that authenticate messages. Disaster recovery plans that ensure proper backup of files. Hardware security modules that store sensitive data.

Activity logs that indicate failed transactions.

Which of the following questions is not appropriate for an internal control questionnaire concerning securities? Do the internal auditors periodically test controls over securities? Is there a periodic reconciliation of the detail of securities with the security control account? Is there a record of all identification numbers of securities, and are securities held in the name of the company? All of the questions are appropriate.

All of the questions are appropriate.

Which of the following is an internal control weakness related to factory equipment? Checks issued in payment of purchases of equipment are not signed by the controller. All purchases of factory equipment are required to be made by the department in need of the equipment. Factory equipment replacements are usually made when estimated useful lives, as indicated in depreciation schedules, have expired. Proceeds from sales of fully depreciated equipment are credited to other income.

All purchases of factory equipment are required to be made by the department in need of the equipment.

Which of the following controls is most effective in providing reasonable assurance that salary, wage, and benefit expenses are incurred only for work performed? The accuracy of extensions of hours worked and pay rates is rechecked by an independent party, and pay rate and other key payroll information is changed only upon the receipt of a written authorization from the human resources department. All time cards and reports are reviewed and approved in writing by immediate line supervisors having no responsibilities for paycheck distribution. Actual payroll amounts are regularly compared against budgeted amounts by management, with all material budget variances being investigated. The payroll register is used as the source document for posting employment-related expenses to the general ledger.

All time cards and reports are reviewed and approved in writing by immediate line supervisors having no responsibilities for paycheck distribution.

Which of the following constitutes the best evidence of the transfer of accountability for incoming material from the receiving department to other departments or activities? The physical evidence of that type of material in other departments. Oral evidence from personnel in both receiving and other departments. An authorized signature on the prescribed transfer form. Documentary evidence in the form of entries in journals and ledgers.

An authorized signature on the prescribed transfer form.

Which of the following controls would an entity most likely use in safeguarding against the loss of trading securities? A designated member of the board of directors controls the securities in a bank safe-deposit box. The internal auditor verifies the trading securities in the entity's safe each year on the balance sheet date. An independent trust company that has no direct contact with the employees who have record-keeping responsibilities has possession of the securities. The independent auditor traces all purchases and sales of trading securities through the subsidiary ledgers to the general ledger.

An independent trust company that has no direct contact with the employees who have record-keeping responsibilities has possession of the securities.

Which of the following internal control activities is not usually performed in the CFO's department? Verifying the accuracy of checks and vouchers. Canceling payment vouchers when paid. Approving vendors' invoices for payment. Controlling the mailing of checks to vendors.

Approving vendors' invoices for payment.

Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable? Are two or more authorized signatures required on checks that repay notes payable? Are the proceeds from notes payable used for the purchase of noncurrent assets? Are direct borrowings on notes payable authorized by the board of directors? Are assets that collateralize notes payable critically needed for the entity's continued existence?

Are direct borrowings on notes payable authorized by the board of directors?

Which of the following questions is inappropriate on an internal control questionnaire concerning purchase transactions? Are prenumbered purchase orders and receiving reports used and accounted for? Are an approved purchase requisition and a signed purchase order required for each purchase? Are all goods received in a centralized receiving department and counted, inspected, and compared with purchase orders on receipt? Are intact cash receipts deposited daily in the bank?

Are intact cash receipts deposited daily in the bank?

Which of the following questions should not appear in an internal control questionnaire relating to cash disbursements? Is each check supported by an approved voucher? Are prelistings made of all cash receipts? Are all disbursements except for petty cash made by check? Are imprinted and prenumbered checks used and is a check protection device used in printing the check amount?

Are prelistings made of all cash receipts?

Which of the following questions would an auditor least likely include on an internal control questionnaire concerning the initiation and execution of equipment transactions? Are prenumbered purchase orders used for equipment and periodically accounted for? Are requests for major repairs approved at a higher level than the department initiating the request? Are competitive bids solicited for purchases of equipment? Are procedures in place to monitor and properly restrict access to equipment?

Are procedures in place to monitor and properly restrict access to equipment?

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness assertion for purchases? Is the unpaid voucher file periodically reconciled with inventory records by an employee who does not have access to purchase requisitions? Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for? Is an authorized purchase order required before the receiving department can accept a shipment or the vouchers payable department can record a voucher? Are purchase requisitions prenumbered and independently matched with vendor invoices?

Are purchase orders, receiving reports, and vouchers prenumbered and periodically accounted for?

To achieve effective internal control over fixed-asset additions, a company should require Performance of recurring fixed-asset maintenance work solely by maintenance department employees. Classification as investments of those fixed-asset additions that are not used in the business. Authorization and approval of major fixed-asset additions. Capitalization of the cost of fixed-asset additions in excess of a specific dollar amount.

Authorization and approval of major fixed-asset additions

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to segregate the Administrative controls from the internal accounting controls. Operational responsibility from the record-keeping responsibility. Authorization of transactions from the custody of related assets. Human resources function from the controllership function.

Authorization of transactions from the custody of related assets.

An auditor most likely would assess the risks of material misstatement as unacceptable if the payroll department supervisor is responsible for Authorizing payroll rate changes for all employees. Comparing payroll registers with original batch transmittal data. Examining authorization forms for new employees. Hiring all subordinate payroll department employees.

Authorizing payroll rate changes for all employees.

Which of the following human resources department procedures reduces the risk of payroll fraud and represents an appropriate responsibility for the department? Collection and retention of unclaimed paychecks. Authorizing overtime hours. Distributing paychecks. Authorizing the addition or deletion of employees from the payroll.

Authorizing the addition or deletion of employees from the payroll.

An audit of the electronic data interchange (EDI) area of a purchasing department revealed the facts listed below. Which one indicates the need for improved internal control? The system employs message sequencing as a way to monitor data transmissions. Employees may access the computer system only via an ID and an encrypted password. Branch office employees may access the server with a single call via modem. Certain types of transactions may be made only at specific terminals.

Branch office employees may access the server with a single call via modem.

In meeting the control objective of safeguarding of assets, which department should be responsible for Distribution of Paychecks Custody of Unclaimed Paychecks

CFO CFO

An internal control questionnaire indicates that an approved receiving report is required to accompany every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively? Select and examine Canceled checks and ascertain that the related receiving reports are dated no earlier than the checks. Canceled checks and ascertain that the related receiving reports are dated no later than the checks. Receiving reports and ascertain that the related canceled checks are dated no later than the receiving reports. Receiving reports and ascertain that the related canceled checks are dated no earlier than the receiving reports.

Canceled checks and ascertain that the related receiving reports are dated no later than the checks.

Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department? Verifying the mathematical accuracy of the vendor's invoice. Comparing the vendor's invoice with the receiving report. Approving the voucher for payment by an authorized person. Canceling supporting documentation after payment.

Canceling supporting documentation after payment.

To avoid potential errors and fraud, well-designed internal control in the accounts payable area should include a segregation of which of the following functions? Cash disbursements and vendor invoice verification. Check signing and cancellation of payment documentation. Physical handling of merchandise received and preparation of receiving reports. Vendor invoice verification and merchandise ordering.

Cash disbursements and vendor invoice verification.

Which of the following items in a communication about control deficiencies in internal control over cash receipts and disbursements is least significant? Signed checks are distributed by the controller to approved payees. Cash receipts are not deposited intact daily. Checks are signed by one person. CFO fails to verify the names and addresses of check payees.

Checks are signed by one person.

As an in-charge auditor, you are reviewing a communication about significant deficiencies and material weaknesses related to internal control over cash receipts and disbursements. Which of the following conditions, standing alone, should cause you the least concern? CFO fails to establish that the names and addresses of check payees are bona fide. Signed checks are distributed by the controller to approved payees. Checks are signed by only one person. Cash disbursements are made directly out of cash receipts.

Checks are signed by only one person.

Which of the following is a standard control over cash disbursements? Checks should be sent directly to the payee by the employee who prepares documents that authorize check preparation. Checks should be signed by the controller and at least one other employee of the company. Checks should be sequentially numbered and the numerical sequence should be accounted for by the person preparing bank reconciliations. Checks and supporting documents should be marked "Paid" immediately after the check is returned with the bank statement.

Checks should be sequentially numbered and the numerical sequence should be accounted for by the person preparing bank reconciliations. This answer is correct.

A company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows: EmployeeResponsibilityClerk 1Reviews vendor invoices for proper signature approval. Clerk 2Enters vendor invoices into the accounting system and verifies payment terms.Clerk 3Posts entered vendor invoices to the accounts payable ledger for payment and mails checks.TreasurerReviews the vendor invoices and signs each check. Which of the following would indicate a weakness in the company's internal control? Clerk 2 reconciles the accounts payable ledger with the general ledger monthly. Clerk 1 opens all of the incoming mail. The treasurer uses a stamp for signing checks. Clerk 3 mails the checks and remittances after they have been signed.

Clerk 3 mails the checks and remittances after they have been signed.

Independent internal verification of inventory occurs when employees who Compare records of goods on hand with physical quantities do not maintain the records or have custody of the inventory. Issue raw materials obtain materials requisitions for each issue and prepare daily totals of materials issued. Obtain receipts for the transfer of completed work to finished goods prepare a completed production report. Are independent of issuing production orders update records from completed job cost sheets and production cost reports on a timely basis.

Compare records of goods on hand with physical quantities do not maintain the records or have custody of the inventory.

Which of the following controls could best prevent direct labor from being charged to manufacturing overhead? Reconciliation of work-in-process inventory with cost records. Reconciliation of unfinished job summary and production cost records. Comparison of periodic cost budgets and time cards. Comparison of daily journal entries with factory labor summary.

Comparison of daily journal entries with factory labor summary.

During the audit of a construction contract, it was discovered that the contractor was being paid for each ton of dirt removed. The contract called for payment based on cubic yards removed. Which internal control might have prevented this error? Extension checks of invoice amounts. Comparison of invoices with receiving reports. Comparison of invoices with purchase orders or contracts. Comparison of actual costs with budgeted costs.

Comparison of invoices with purchase orders or contracts.

In auditing an entity's computerized payroll transactions, an auditor would be least likely to use test data to test controls concerning Control and distribution of unclaimed checks. Missing employee identification numbers. Withholding of taxes and Social Security contributions. Overpayment of employees for hours not worked.

Control and distribution of unclaimed checks.

Which of the following control activities is not usually performed with regard to vouchers payable in the accounting department? Determining the mathematical accuracy of the vendor's invoice. Controlling the mailing of the check and remittance advice. Having an authorized person approve the voucher. Matching the receiving report with the purchase order.

Controlling the mailing of the check and remittance advice.

Each of the following is an appropriate control over securities and investments except Custodian separate from treasury function. Custodian bonded and separate from investment records. Proper authorization of transactions. Storage in a safe-deposit box.

Custodian separate from treasury function.

The objectives of internal control for a production cycle are to provide assurance that transactions are properly executed and recorded, and that Independent internal verification of activity reports is established. Transfers to finished goods are documented by a completed production report and a quality control report. Custody of work-in-process and of finished goods is properly maintained. Production orders are prenumbered and signed by a supervisor.

Custody of work-in-process and of finished goods is properly maintained.

For effective internal control, which of the following functions should not be the responsibility of the CFO's department? Establishing credit policies. Custody of securities. Data processing. Handling of cash.

Data processing.

When the shipping department returns nonconforming goods to a vendor, the purchasing department should send to the accounting department the Debit memo. Unpaid voucher. Credit memo. Vendor invoice.

Debit memo.

In an entity under audit, employees have the opportunity to change their time worked after their timecards have been approved. This is an example of which of the following types of deficiency? Operating. Accounting. Procedural. Design.

Design.

A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to Detect any fictitious employee who may have been placed on the payroll. To insure that the checks are voided immediately. Prevent a bona fide employee's check from being claimed by another employee. Assure that employees who were absent on a payroll distribution day are not paid for that day.

Detect any fictitious employee who may have been placed on the payroll.

The primary audit objective regarding the purchasing of materials by the client is to Investigate the recording of unusual transactions regarding materials. Ascertain that materials paid for are on hand. Determine the reliability of financial reporting by the purchasing function. Observe the annual physical count.

Determine the reliability of financial reporting by the purchasing function.

Appropriate control over obsolete materials requires that they be Carried at cost in the accounting records until the actual disposition takes place. Sorted, treated, and packaged before disposition in order to obtain the best selling price. Determined by an approved authority to be unusable for their normal purposes. Retained within the regular storage area.

Determined by an approved authority to be unusable for their normal purposes.

What is the advantage of a payroll computer system? Direct deposit into employees' accounts. Online, real-time processing of checks. Change in the objectives of control. Batch processing of file updates.

Direct deposit into employees' accounts.

Which control is not appropriate for property, plant, and equipment? Proper authority for acquisition and retirement of assets. Detailed property records and physical controls over assets. Written policies for capitalization and expenditure and review of application of depreciation methods. Disposal of fully depreciated assets.

Disposal of fully depreciated assets.

Effective control over the cash payroll function would mandate which of the following? A separate checking account for payroll should be maintained. The payroll clerk should fill the envelopes with cash and a computation of the net wages. Each employee should be asked to sign a receipt. Unclaimed pay envelopes should be retained by the paymaster.

Each employee should be asked to sign a receipt.

Which of the following is an advantage of electronic data interchange (EDI)? Absence of a long-term contract. Replacement of value-added networks (VANs). Omission of an audit trail. Elimination of internal paper documents.

Elimination of internal paper documents.

Which of the following statements is true concerning the security of messages in an electronic data interchange (EDI) system? Message authentication in EDI systems performs the same function as separation of duties in other information systems. Encryption performed by physically secure hardware devices is more secure than encryption performed by software. Security in the transaction phase in EDI systems is not necessary because problems at that level will usually be identified by the service provider. When confidentiality of data is the primary risk, message authentication is the preferred control rather than encryption.

Encryption performed by physically secure hardware devices is more secure than encryption performed by software.

An administrative tool that aids in the control of the financial management function is a cash budget. The principal aim of a cash budget is to Measure adherence to company budgetary procedures. Prevent the posting of cash receipts and disbursements to incorrect accounts. Ensure that sufficient funds are available at all times to satisfy maturing liabilities. Assure that the accounting for cash receipts and disbursements is consistent from year to year.

Ensure that sufficient funds are available at all times to satisfy maturing liabilities.

For effective internal control, the accounts payable department ordinarily should Obliterate the quantity ordered on the receiving department copy of the purchase order. Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. Establish the agreement of the vendor's invoice with the receiving report and purchase order. Ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee.

Establish the agreement of the vendor's invoice with the receiving report and purchase order.

An essential procedural control to ensure the accuracy of the recorded inventory quantities is Performing a gross profit test. Calculating unit costs and valuing obsolete or damaged inventory items in accordance with inventory policy. Establishing a cutoff for goods received and shipped. Testing inventory extensions.

Establishing a cutoff for goods received and shipped.

A client's materials purchasing cycle begins with requisitions from user departments and ends with the receipt of materials and the recognition of a liability. An auditor's primary objective in reviewing this cycle is to Investigate the physical handling and recording of unusual acquisitions of materials. Evaluate the reliability of information generated by the purchasing process. Ascertain that materials ordered, received, and paid for are on hand. Consider the need to be on hand for the annual physical count if this system is not functioning properly.

Evaluate the reliability of information generated by the purchasing process.

An auditor's tests of controls over the issuance of raw materials to production would most likely include Observing that raw materials are stored in secure areas and that storeroom security is supervised by a responsible individual. Reconciling raw materials and work-in-process perpetual inventory records to general ledger balances. Examining materials requisitions and reperforming client controls designed to process and record issuances. Inquiring of the custodian about the procedures followed when defective materials are received from vendors.

Examining materials requisitions and reperforming client controls designed to process and record issuances.

Before sending or receiving EDI messages, a company should Reduce inventory levels in anticipation of receiving shipments. Execute a trading partner agreement with each of its customers and suppliers. Demand that all its suppliers implement EDI capabilities. Evaluate the effectiveness of its use of EDI transmissions.

Execute a trading partner agreement with each of its customers and suppliers.

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries? Controller. CFO. Human resources. Payroll.

Human resources.

In a review of an EDI application using a third-party service provider, the auditor should I. Ensure encryption keys meet ISO standards II. Determine whether an independent review of the service provider's operation has been conducted III. Verify that only public-switched data networks are used by the service provider IV. Verify that the service provider's contracts include necessary clauses, such as the right to audit I and IV. II and IV. I and II. II and III.

II and IV.

Which of the following would an auditor ordinarily consider the greatest risk regarding an entity's use of electronic data interchange (EDI)? Authorization of EDI transactions. Elimination of paper documents. Improper distribution of EDI transactions. Duplication of EDI transmissions.

Improper distribution of EDI transactions.

To strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic Increase in insurance coverage. Inspection of equipment and reconciliation with accounting records. Verification of liens, pledges, and collateralizations. Accounting for work orders.

Inspection of equipment and reconciliation with accounting records.

Internal control over inventories is important for all of the following reasons except Inventories are a material component of total assets. Inventories are often the largest current asset. Inventories are the most liquid asset. Inventories directly affect the results of operations.

Inventories are the most liquid asset.

Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by an internal control activity that provides for Segregation of duties for employees in the accounts payable department. Independent verification of invoices for disbursements recorded as equipment acquisitions. Investigation of variances within a formal budgeting system. Authorization by the board of directors of significant equipment acquisitions.

Investigation of variances within a formal budgeting system.

In testing controls over cash disbursements, an auditor most likely would determine that the person who signs checks also Returns the checks to accounts payable. Is responsible for mailing the checks. Reviews the monthly bank reconciliation. Is denied access to the supporting documents.

Is responsible for mailing the checks.

Which of the following questions would not be appropriate for an internal control questionnaire concerning inventory?

Is the storeroom located in close proximity to the shipping department?

A purchasing agent places an order for inventory whenever a requisition is received from the warehouse. The warehouse clerk issues requisitions based on periodic physical counts because no perpetual records are maintained. Numerous duplicate orders have been placed for goods previously ordered but not received. To prevent this excess ordering, the firm should Keep an adequate record of open purchase orders and review it before ordering. Use prenumbered purchase orders. Count goods in the warehouse less often. Not use purchase requisitions.

Keep an adequate record of open purchase orders and review it before ordering.

In a well-designed internal control system, the same employee may be permitted to Mail signed checks and also prepare bank reconciliations. Prepare receiving reports and also approve purchase orders. Approve vouchers for payment and also have access to unused purchase orders. Mail signed checks and also cancel supporting documents.

Mail signed checks and also cancel supporting documents.

Which of the following is an operating control over the staffing function? Making background checks on all new hires. Encouraging new hires to participate in professional organizations. Requiring personnel to participate in firm-sponsored external activities. Maintaining records of the department's accomplishments.

Making background checks on all new hires.

One objective of internal control is to record property, plant, and equipment (PPE) additions correctly as to account, amount, and period. Which of the following environmental considerations indicates that the risks of material misstatement of these additions are high? Recently acquired loans preclude further plant acquisition for 3 years. All material additions are required to be approved by the board of directors. Most construction is performed in-house. Gross property, plant, and equipment increased 36% during the current period.

Most construction is performed in-house.

An auditor notes year-to-year increases of over $200,000 for small tool expense at a manufacturing facility that has produced the same amount of identical product for the last 3 years. Production inventory is kept in a controlled staging area adjacent to the receiving dock, but the supply of small tools is kept in an unsupervised area near the exit to the plant employees' parking lot. After determining that all of the following alternatives are equal in cost and are also feasible for local management, the auditor can best address the security issue by recommending that plant management Initiate a full physical inventory of small tools on a monthly basis. Place supply of small tools in a secured area, install a key-access card system for all employees, and record each key-access transaction on a report for the production superintendent. Move the small tools inventory to the custody of the production inventory staging superintendent and implement the use of a special requisition to issue small tools. Close the exit to the employee parking lot and require all plant employees to use a doorway by the receiving dock that also provides access to the plant employees' parking area.

Move the small tools inventory to the custody of the production inventory staging superintendent and implement the use of a special requisition to issue small tools.

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and Recompute the payroll deductions for employee fringe benefits. Verify the preparation of the monthly payroll account bank reconciliation. Observe the segregation of duties concerning human resources responsibilities and payroll disbursement. Inspect evidence of accounting for prenumbered payroll checks.

Observe the segregation of duties concerning human resources responsibilities and payroll disbursement.

Effective controls relevant to purchasing of raw materials should usually include all of the following except Obtaining third-party written quality and quantity reports prior to payment for the raw materials. Systematic reporting of product changes that will affect raw materials. Obtaining financial approval prior to making a commitment. Determining the need for the raw materials prior to preparing the purchase order.

Obtaining third-party written quality and quantity reports prior to payment for the raw materials.

In assessing risks of material misstatement for purchases, an auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support? Completeness. Accuracy. Classification. Occurrence.

Occurrence.

A receiving department receives copies of purchase orders for use in identifying and recording inventory receipts. The purchase orders list the name of the vendor and the quantities of the materials ordered. A possible error that this system could allow is Payment to unauthorized vendors. Overpayment for partial deliveries. Payment for unauthorized purchases. Delay in recording purchases.

Overpayment for partial deliveries.

Matthews Corp. has changed from a system of recording time worked on time clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer system automatically updates all payroll records. Because of this change Part of the audit trail is altered. Transactions must be processed in batches. The potential for payroll-related fraud is diminished. A generalized computer audit program must be used.

Part of the audit trail is altered.

Propex Corporation uses a voucher register and does not record invoices in a subsidiary ledger. Propex will probably benefit most from the additional cost of maintaining an accounts payable subsidiary ledger if Vendors' requests for confirmation of receivables often go unanswered for several months until paid invoices can be reviewed. It is difficult to reconcile vendors' monthly statements. Partial payments to vendors are continuously made in the ordinary course of business. There are usually invoices in an unmatched invoice file.

Partial payments to vendors are continuously made in the ordinary course of business.

Which of the following situations represents an internal control weakness in the payroll department? The timekeeping function is independent of the payroll department. Payroll records are reconciled with quarterly tax reports. Paychecks are distributed by the employees' immediate supervisors. Payroll department personnel are rotated in their duties.

Paychecks are distributed by the employees' immediate supervisors.

In a payroll computer system, data from what file is matched periodically with wage rate and other information to calculate payroll? Personnel master file. Production schedule. Production order master file. Payroll master file.

Payroll master file.

The sampling unit in a test of controls pertaining to the occurrence of payroll transactions ordinarily is a(n) Employee Form W-2. Employee personnel record. Payroll register entry. Time clock card.

Payroll register entry.

In manufacturing environments, employees are often required to use time cards and job time tickets. Which is the false statement related to the use of these documents? Time reported on job time tickets should be reconciled to time cards. Payroll should be prepared from job time tickets. Job time tickets are completed by employees for each job worked on, and an employee may have one or many job time tickets in a day. Only one time card should exist for each employee.

Payroll should be prepared from job time tickets

Which of the following internal control activities most likely would be used to maintain accurate inventory records? Periodic inventory counts are used to adjust the perpetual inventory records. Perpetual inventory records are periodically compared with the current cost of individual inventory items. Requisitions, receiving reports, and purchase orders are independently matched before payment is approved. A just-in-time inventory ordering system keeps inventory levels to a desired minimum.

Periodic inventory counts are used to adjust the perpetual inventory records.

Which of the following internal control activities most likely justifies reducing the assessment of the risks of material misstatement for plant and equipment acquisitions? The review of prenumbered purchase orders to detect unrecorded trade-ins. Approval of periodic depreciation entries by a supervisor independent of the accounting department. Periodic physical inspection of plant and equipment by the internal audit staff. Comparison of current-year plant and equipment account balances with prior-year actual balances.

Periodic physical inspection of plant and equipment by the internal audit staff.

Many entities use the Internet as a network to transmit electronic data interchange (EDI) transactions. An advantage of using the Internet for electronic commerce rather than a traditional value-added network (VAN) is that the Internet Permits EDI transactions to be sent to trading partners as transactions occur. Possesses superior characteristics regarding disaster recovery. Converts EDI transactions to a standard format without translation software. Automatically batches EDI transactions to multiple trading partners.

Permits EDI transactions to be sent to trading partners as transactions occur.

Which of the following controls most likely would assist in reducing the risks of material misstatement related to the existence or occurrence of manufacturing transactions? Perpetual inventory records are independently compared with goods on hand. Forms used for direct materials requisitions are prenumbered and accounted for. Finished goods are stored in locked limited-access warehouses. Subsidiary ledgers are periodically reconciled with inventory control accounts.

Perpetual inventory records are independently compared with goods on hand.

In a purchases-payables computer system, control activities implemented to ensure proper input include Validity tests. Device authorization tables. Preformatted screens. Passwords.

Preformatted screens.

The manager of the production department is concerned that employees have worked too many hours. The company allows full-time employees to work only 40 hours in a normal work week. The control that identifies excess hours is a(n) Exception report. Validity check. Preformatted data entry screen. Reasonableness test.

Reasonableness test.

Which of the following statements is correct concerning internal control in an electronic data interchange (EDI) system? Preventive controls generally are more important than detective controls in EDI systems. Internal controls related to the segregation of duties generally are the most important controls in EDI systems. Internal controls in EDI systems rarely permit the risks of material misstatement to be assessed at an acceptably low level. Control objectives for EDI systems generally are different from the objectives for other information systems.

Preventive controls generally are more important than detective controls in EDI systems.

What information would the auditor expect to find in the data dictionary that would assist in a payroll application audit? Programs that access the data. Online user identification. System network architecture and flowcharts. Type of operating system.

Programs that access the data.

Reduced levels in the inventory master file result in transmission of a purchase requisition to the relevant purchasing staff. Once this requisition has been approved, the Newly ordered inventory is automatically added to the inventory master file. Goods arrive and the receiving department accepts the shipment. Open purchase order file is updated. Purchase order program prints the purchase order for mailing to the vendor.

Purchase order program prints the purchase order for mailing to the vendor.

Which of the following controls is most effective in providing assurance that recorded purchases are free of material errors? Vendors' invoices are compared with purchase orders by an employee who is independent of the receiving department. Purchase orders, receiving reports, and vendors' invoices are independently matched in preparing vouchers. The receiving department compares the quantity ordered on purchase orders with the quantity received on receiving reports. Receiving reports require the signature of the individual who authorized the purchase.

Purchase orders, receiving reports, and vendors' invoices are independently matched in preparing vouchers.

In a purchases-payables computer system, a purchase order is created after whichdocument has been processed? Purchase requisition. Authorization to accept shipment. Vendor invoice. Receiving report.

Purchase requisition.

Your objective is to determine that nonrecurring purchases, initiated by various user organizations, have been properly authorized. If all purchases are made through the purchasing department, to which of the following documents should you vouch purchases? Invoices. Purchase requisitions. Receiving reports. Purchase orders.

Purchase requisitions.

For several years a client's physical inventory count has been lower than what was shown on the books at the time of the count, and downward adjustments of the inventory account have been required. Contributing to the inventory problem could be material weaknesses in internal control that led to the failure to record some Cash purchases. Purchases returned to vendors. Sales discounts allowed. Sales returns received.

Purchases returned to vendors.

Which of the following internal control activities most likely addresses the completeness assertion for inventory? Receiving reports are prenumbered and periodically reconciled. There is a separation of duties between payroll department and inventory accounting personnel. Work-in-process is periodically reconciled with subsidiary records. Employees responsible for custody of finished goods do not perform the receiving function.

Receiving reports are prenumbered and periodically reconciled.

In a properly designed internal control system, the same employee most likely would match vendors' invoices with receiving reports and also Recompute the calculations on vendors' invoices. Post the detailed accounts payable records. Cancel vendors' invoices after payment. Reconcile the accounts payable ledger.

Recompute the calculations on vendors' invoices.

In a purchases-payables computer system, access logs do which of the following? Record transactions. Approve requisitions for purchases. Determine whether quantities are acceptable. Restrict access.

Record transactions.

Which of the following is usually a benefit of using electronic funds transfer for international cash transactions? Creation of self-monitoring access controls. Reduction of the frequency of data entry errors. Improvement of the audit trail for cash receipts and disbursements. Off-site storage of source documents for cash transactions.

Reduction of the frequency of data entry errors.

Under which of the following circumstances would an auditor be most likely to intensify an audit of a $500 imprest petty cash fund? Reimbursement occurs twice each week. The custodian endorses reimbursement checks. The custodian occasionally uses the cash fund to cash employee checks. Reimbursement vouchers are not prenumbered.

Reimbursement occurs twice each week.

To minimize the risk that agents in the purchasing department will use their positions for personal gain, the organization should Require competitive bidding. Request internal auditors to confirm selected purchases and accounts payable. Direct the purchasing department to maintain records on purchase prices paid, with review of such records required every 6 months. Specify that all items purchased must pass value-per-unit-of-cost reviews.

Require competitive bidding.

Which of the following payroll control activities would most effectively ensure that payment is made only for work performed? Require employees to have their direct supervisors approve their time cards. Require all employees to record arrival and departure by using the time clock. Require all employees to sign their time cards. Have a payroll clerk recalculate all time cards.

Require employees to have their direct supervisors approve their time cards.

Each Friday afternoon, payroll checks are distributed by the shift superintendent. The plant is so large and the turnover is so great that the superintendent does not know many of the workers. Undelivered checks are returned to the payroll clerk, from whom the workers can obtain them at some later time. The payroll clerk routinely continues the payroll record for workers one week after their departure from the firm, ultimately cashes the unclaimed checks, and keeps the money. Which of the following is a control designed to prevent this misappropriation? Require the CFO's office to prepare checks only on the basis of supporting documentation from both the timekeeper and payroll office. Require the shift superintendent to know all the workers by name. Periodically rotate the shift superintendent. Require the timekeeper to compute the weekly pay of each worker and to make distribution of the checks received from the CFO's office.

Require the CFO's office to prepare checks only on the basis of supporting documentation from both the timekeeper and payroll office.

Which of the following controls will most likely allow for a reduction in the scope of the auditor's tests of depreciation expense? Authorization of payment of vendors' invoices by a designated employee who is independent of the equipment receiving function. Review and approval of the periodic equipment depreciation entry by a supervisor who does not actively participate in its preparation. Comparison of equipment account balances for the current year with the current-year budget and prior-year actual balances. Review of the miscellaneous income account for salvage credits and scrap sales of partially depreciated equipment.

Review and approval of the periodic equipment depreciation entry by a supervisor who does not actively participate in its preparation.

An audit team has concluded that inventory is highly susceptible to misappropriation and that a potential misstatement would be material to the financial statements. How should the audit team address the audit procedures to the increased risk? Review the client's control procedures over the safeguarding of inventory, but do not modify substantive procedures over inventory. Review the client's control procedures over the safeguarding of inventory, incorporate the use of substantive analytical procedures, and develop an expectation. Review the client's control procedures over the safeguarding of inventory and perform physical inventory counts throughout the current year. Review the client's control procedures over the safeguarding of inventory and perform a physical inventory count on the last day of the current year.

Review the client's control procedures over the safeguarding of inventory and perform a physical inventory count on the last day of the current year.

In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would Perform analytical procedures designed to identify cost variances. Analyze the liquidity and turnover ratios of the inventory. Review the entity's descriptions of inventory policies and procedures. Perform test counts of inventory during the entity's physical count.

Review the entity's descriptions of inventory policies and procedures.

Which of the following organizational controls related to the processing of scrap would you recommend? Segregate the responsibility for processing scrap materials from the operational activities that produce the scrap materials. Define each manager's responsibility for processing scrap and authorize one person in each production department to perform this function. Specify detailed procedures for each manager to follow in determining the quantity, grade, and packaging of scrap. Give the managers the authority to obtain competitive bids for the disposal of scrap.

Segregate the responsibility for processing scrap materials from the operational activities that produce the scrap materials.

Organizational independence in the processing of payroll is achieved by functional segregations that are built into the system. Which one of the following functional segregations is not required for internal control purposes? Segregation of payroll preparation and maintenance of year-to-date records. Segregation of payroll preparation and paycheck distribution. Segregation of human resources function from payroll preparation. Segregation of timekeeping from payroll preparation.

Segregation of payroll preparation and maintenance of year-to-date records.

If internal control is properly designed, the same employee may be permitted to Reconcile the bank statements and also receive and deposit cash. Approve vouchers for payment and also sign checks. Sign checks and also cancel supporting documents. Receive and deposit checks and also approve write-offs of customer accounts.

Sign checks and also cancel supporting documents.

An effective control that protects against the preparation of improper or inaccurate disbursements is to require that all checks be Signed by an officer after necessary supporting evidence has been examined. Sequentially numbered and accounted for by internal auditors. Perforated or otherwise effectively canceled when they are returned with the bank statement. Reviewed by the CFO before mailing.

Signed by an officer after necessary supporting evidence has been examined.

Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements? The entity's management places no emphasis on meeting publicized earnings projections. Significant differences between the physical inventory count and the accounting records are not investigated. Monthly bank reconciliations ordinarily include several large outstanding checks. Cash transactions are electronically processed and recorded, leaving no paper audit trail.

Significant differences between the physical inventory count and the accounting records are not investigated.

Mailing disbursement checks and remittance advices should be controlled by the employee who Agrees the check register to the daily check summary. Signs the checks last. Matches the receiving reports, purchase orders, and vendors' invoices. Prepares the daily voucher summary.

Signs the checks last.

To provide assurance that each voucher is submitted and paid only once, an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is Prenumbered and accounted for. Approved for authorized purchases. Stamped "paid" by the check signer. Supported by a vendor's invoice.

Stamped "paid" by the check signer.

An internal auditor is reviewing the company's policy regarding investing in financial derivatives. The auditor would normally expect to find all of the following in the policy except a Specific authorization limit for the amount and types of derivatives that can be used by the organization. Statement requiring board review of each transaction because of the risk involved in such transactions. Specific limit on the amount authorized for any single trader. Statement indicating whether derivatives are to be used for hedging or speculative purposes.

Statement requiring board review of each transaction because of the risk involved in such transactions.

Fraudulent use of corporate credit cards will be minimized by which of the following controls? Subjecting credit card charges to the same expense controls as those used on regular company expense forms. Establishing a corporate policy on the issuance of credit cards to authorized employees. Reconciling the monthly statement from the credit card company with the submitted copies of the cardholders' charge slips. Periodically reviewing the validity of the need for credit cards at executive and operating levels.

Subjecting credit card charges to the same expense controls as those used on regular company expense forms.

The procedure that best discourages the resubmission of vendor invoices after they have been paid is The mailing of payments directly to payees by accounting personnel. The cancelation of vouchers by accounting personnel. A requirement for double endorsement of checks. The cancelation of vouchers by CFO personnel.

The cancelation of vouchers by CFO personnel.

Based on observations made during an audit, the auditor should discuss with management the effectiveness of the company's controls that protect against the purchase of Supplies individually ordered, without considering possible volume discounts. New equipment that is needed but does not qualify for an accelerated write-off under the class life rules. Inventory items acquired based on an economic order quantity (EOQ) inventory management concept. Required supplies provided by a vendor who offers no trade or cash discounts.

Supplies individually ordered, without considering possible volume discounts.

Which of the following observations made during the preliminary survey of a local department store's disbursement cycle reflects a control strength? Individual department managers are responsible for the movement of merchandise from the receiving dock to storage or sales areas as appropriate. The receiving department is given a copy of the purchase order complete with a description of goods, quantity ordered, and extended price for all merchandise ordered. The CFO's office prepares checks for suppliers based on vouchers prepared by the accounts payable department. Individual department managers use prenumbered forms to order merchandise from vendors.

The CFO's office prepares checks for suppliers based on vouchers prepared by the accounts payable department.

Which of the following describes a weakness in accounts payable procedures? The accounts payable manager issues purchase orders. The accounts payable system compares the receiving report to the vendor invoice. The accounts payable clerk manually verifies arithmetic on the vendor invoice. The accounts payable clerk files invoices and supporting documentation after payment.

The accounts payable manager issues purchase orders.

A purchasing agent searches the inventory master file for what information relevant to a purchase? The reorder point and relevant costs. The approved vendor and the economic order quantity. Relevant costs, list of approved vendors, and the sales order. The requisition request and any relevant costs.

The approved vendor and the economic order quantity.

Which of the following controls should prevent an invoice for the purchase of merchandise from being paid twice? The check signer accounts for the numerical sequence of receiving reports used in support of each payment. Two check signers are required for all checks over a specified amount. An individual independent of cash operations prepares a bank reconciliation. The check signer reviews and cancels the voucher packets.

The check signer reviews and cancels the voucher packets.

Which of the following events occurring in the year under audit would most likely indicate that internal controls utilized in previous years may be inadequate in the year under audit? The chief financial officer waived approvals on all checks to one vendor to expedite payment. The entity announced that the internal audit function would be eliminated after the balance sheet date. The audit committee chairperson unexpectedly resigned during the year under audit. The frequency of accounts payable check runs was changed from biweekly to weekly.

The chief financial officer waived approvals on all checks to one vendor to expedite payment.

The client has equity securities classified as available for sale. The auditor is most concerned about controls related to The accrued interest receivable for the securities. Why specific securities were purchased. When the securities will be sold. The determination of the fair value measurements of the securities.

The determination of the fair value measurements of the securities.

What is a possible consequence of an employee's being able to visit the safe-deposit box unaccompanied? The employee could steal securities, and the theft would never be discovered. There would be no record of when company personnel visited the safe-deposit box. It would be impossible to obtain a fidelity bond on the employee. The employee could pledge corporate investments as security for a short-term personal bank loan.

The employee could pledge corporate investments as security for a short-term personal bank loan.

Which of the following activities most likely would be considered a weakness in an entity's internal control over payroll? Payroll checks are prepared by the accounts payable department and signed by the CFO. The human resources department sends employees' termination notices to the payroll department. A voucher for the amount of the payroll is prepared in the general accounting department based on the payroll department's payroll summary. The employee who distributes payroll checks returns unclaimed payroll checks to the payroll department.

The employee who distributes payroll checks returns unclaimed payroll checks to the payroll department.

In which of the following situations would it be most important to have employees sign for their pay? Human resources maintains records of hiring and firing. The firm uses an imprest checking account. A paymaster distributes paychecks. The firm uses a cash payment payroll function.

The firm uses a cash payment payroll function.

Which of the following is a control activity that most likely could help prevent employee payroll fraud? Salary rates resulting from new hires are approved by the payroll supervisor. The human resources department promptly sends employee termination notices to the payroll supervisor. Employees who distribute payroll checks forward unclaimed payroll checks to the absent employees' supervisors. Total hours used for determination of gross pay are calculated by the payroll supervisor.

The human resources department promptly sends employee termination notices to the payroll supervisor.

Which of the following internal control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments? Senior management verifies that securities in the bank safe-deposit box are registered in the entity's name. The controller compares the current market prices of recorded investments with the brokers' advices on file. The internal auditor compares the securities in the bank safe-deposit box with recorded investments. The CFO vouches the acquisition of securities by comparing brokers' advices with canceled checks.

The internal auditor compares the securities in the bank safe-deposit box with recorded investments.

Which of the following procedures represents a weakness in internal control for payroll? The payroll department prepares checks. The CFO signs the payroll checks. The payroll department prepares checks using a signature plate. The CFO supervises the process before payroll checks are distributed. The accounting department prepares the electronic transfer of funds to the payroll bank account. The transfer is based on totals from the payroll department summary. The payroll clerk distributes signed payroll checks. Undistributed checks are returned to the payroll department.

The payroll clerk distributes signed payroll checks. Undistributed checks are returned to the payroll department.

An auditor will ordinarily ascertain whether payroll checks are properly endorsed during the audit of The cost accounting system. The payroll register. Cash in bank. Accrued payroll.

The payroll register.

A client's program that recorded receiving report information entered directly by the receiving department on vendor shipment receipt included a reasonableness or limit test. Which of the following errors would this test likely detect? The vendor shipped the wrong item. The receiving department clerk entered the quantity of the product received as 0. The receipt was for a shipment from an unauthorized vendor. The shipment received from the vendor was past due by 2 weeks.

The receiving department clerk entered the quantity of the product received as 0.

Which of the following controls would be most effective in assuring that the proper custody of assets in the investing cycle is maintained? The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safe deposit box by independent personnel. Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. Direct access to securities in the safe-deposit box is limited to only one corporate officer. The purchase and sale of investments are executed on the specific authorization of the board of directors.

The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safe deposit box by independent personnel.

In planning to assess control risk for purchasing and disbursement procedures, the auditor will be least influenced by The strength or weakness of internal control in other areas, e.g., sales and accounts receivable. The availability of a company manual describing purchasing and disbursement procedures. The existence within the purchasing and disbursement area of internal control strengths that offset weaknesses. The scope and results of audit work by the company's internal auditor.

The strength or weakness of internal control in other areas, e.g., sales and accounts receivable.

Effective controls relevant to the efficiency of purchases will result in proper evaluation of the time for ordering merchandise. When making this evaluation, the purchasing company should give primary consideration to The price differences that exist among various vendors who can supply the merchandise at the required time. The trade-off between the cost of owning and storing excess merchandise and the risk of loss by not having merchandise on hand. The flow of funds within the company that indicates when money is available to pay for merchandise. The borrowing cost of money (interest) that the company must incur as a consequence of acquiring the merchandise.

The trade-off between the cost of owning and storing excess merchandise and the risk of loss by not having merchandise on hand.

If a payroll system continues to pay employees who have been terminated, control weaknesses most likely exist because There were inadequate manual controls maintained outside the computer system. Programmed controls such as limit checks should have been built into the system. Procedures were not implemented to verify and control the receipt by the computer processing department of all transactions prior to processing. Input file label checking routines built into the programs were ignored by the operator.

There were inadequate manual controls maintained outside the computer system

Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed? The internal auditor and the controller independently trace all purchases and sales of marketable securities from the subsidiary ledgers to the general ledger. The chairman of the board verifies the marketable securities, which are kept in a bank safe-deposit box, each year on the balance sheet date. The investment committee of the board of directors periodically reviews the investment decisions delegated to the CFO. Two company officials have joint control of marketable securities, which are kept in a bank safe-deposit box.

Two company officials have joint control of marketable securities, which are kept in a bank safe-deposit box.

Which of the following internal control activities most likely would prevent direct labor hours from being charged to manufacturing overhead? Periodic independent counts of work in process for comparison to recorded amounts. Reconciliation of work-in-process inventory with periodic cost budgets. Comparison of daily journal entries with approved production orders. Use of time tickets to record actual labor worked on production orders.

Use of time tickets to record actual labor worked on production orders.

Which of the following is the most important control over acquisitions of property, plant, and equipment? Using a budget to forecast and control acquisitions and retirements. Establishing a written company policy distinguishing between capital and revenue expenditures. Analyzing monthly variances between authorized expenditures and actual costs. Requiring acquisitions to be made by user departments.

Using a budget to forecast and control acquisitions and retirements.

Which of the following activities most likely would detect whether payroll data were altered during processing? Examining source documents for approval by supervisors. Monitoring authorized distribution of data control sheets. Using test data to verify the performance of edit routines. Segregating duties between approval of hardware and software specifications.

Using test data to verify the performance of edit routines.

A company's labor distribution report requires extensive corrections each month because of labor hours charged to inactive jobs. Which of the following data processing input controls appears to be missing? Limit test. Control total. Validity test. Completeness test.

Validity test.

A university does not have a centralized receiving function for departmental purchases of books, supplies, and equipment. Which of the following controls will most effectively prevent payment for goods not received, if performed prior to invoice payment? Vendor invoices should be matched with department purchase orders. Names and addresses on vendor invoices should be compared to a list of department-authorized vendors. Vendor invoices should be approved by a departmental supervisor other than the employee ordering the goods. Invoices over a specified amount should be approved by the vice president of finance.

Vendor invoices should be approved by a departmental supervisor other than the employee ordering the goods.

Effective internal control activities over the payroll function may include Verification of agreement of job time tickets with employee time clock card hours by a timekeeping department employee. Custody of rate authorization records by the supervisor of the payroll department. Preparation of payroll transaction journal entries by an employee who reports to the supervisor of the human resources department. Reconciliation of totals on job time tickets with job reports by employees responsible for those specific jobs.

Verification of agreement of job time tickets with employee time clock card hours by a timekeeping department employee.

In the accounting system of Apogee Company, the quantities counted by the receiving department and entered at a terminal are transmitted to the computer, which immediately transmits the amounts back to the terminal for display on the terminal screen. This display enables the operator to Prevent the overpayment of the account. Verify the authorization of the disbursement. Establish the validity of the account number. Verify that the amount was entered accurately.

Verify that the amount was entered accurately.