AIS Exam 2

Ship the goods to the customer

Within sales process, after receiving a customer purchase order, all of the following steps should be performed before the seller sends a sales order acknowledgment back to the customer, except: Check customer credit Ship the goods to the customer Sales order preparation and approval Verify enough items are in stock to fulfill the order

Require three-way match of purchasing documents before payments are approved

Payments may be made for items not received. Which of the following internal control procedures can best reduce the above risk? -Perform reconciliation between subsidiary ledger and general ledger - Match purchase order with receiving report -Require three-way match of purchasing documents before payments are approved -Require purchase order to be approved

Packing slip

A _______ is a document prepared by the warehouse personnel that lists all items included in a shipment. This document is sent to the customer with the package. -Packing slip -Sales order -Bill of lading -Sales invoice -Picking ticket

Receiving and/or record keeping are performed at one centralized location

A company should study risks common to its system prior to deciding the mix of controls needed. High-risk characteristics in the purchasing process that might justify the need for extensive internal controls include all of the following, except: - High volumes of goods are often received, or the goods are of high value -Goods received are especially difficult to differentiate, count, or inspect -Receiving and/or record keeping are performed at one centralized location -Changes in price or vendors are frequent

Vendors invoices

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 invoice 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: -Approved vouchers -Vendors invoices -Cash disbursement -Receiving reports

Credit accounts receivable

After a credit memo is created and the "return for credit" box is checked on the credit memo, which of the following accounting record updates need to be made? Debit Accounts payable Credit accounts receivable Credit sales return Debit cash

Cash receipts department

All of the following departments are involved in sales return process, except: Cash receipts department Receiving department Accounts receivable department Inventory control department

An approved and open sales order

Before goods are shipped, a company needs to match the goods with which of the following to ensure. the shipment is. valid and actually ordered by a real customer? Packing slip A closed sales order A bill of lading An approved and open sales order

Purchase order, receiving report, and vendors invoice

Before payment is approved and a check is issued to the vendor to pay for an invoice, the company should perform a three-way match to make sure the invoice is valid. Three way match refers to matching: - Purchase order, receiving log, and sales invoice - Purchase order, receiving report, and vendors invoice - Purchase requisition, receiving report, and bank statement - Purchase requisition, purchase order, and receiving report

Verification of the bank statement and the accounts payable account in the general journal

Common types of independent checks within the revenue process include all of the following, except: - Reconciliation of inventory records with actual (counted) quantities on hand - Verification of the bank statement and the accounts payable account in the general journal - Reconciliation of accounts receivable detail with invoices and with the general ledger - Verification of the information in the sales journal and on sales invoices

Preparing credit memo based on original sales invoice

Credit memos may be issued at full price, when the goods were originally sold at a discount. Which of the following internal controls procedures can best reduce the above risk? -Sales order should be reviewed and approved before making a sale to the customer - Match receiving report with credit memo -Preparing credit memo based on original sales invoice -Verify sales invoice for mathematical accuracy before sending it customers

Credit to COGS

During sales process under a perpetual inventory system, when goods are shipped and invoice is created, the following records need to be made, except: Post to AR subsidiary ledger Credit to sales revenue Debit to AR Credit to COGS

Trading partners gain more access to my company data

EDI systems have many advantages within the revenue and cash collection processes. Which of the following is NOT one of those benefits? -Trading partners gain more access to my company data - Reduce risks related to mail delays and human keying errors - Save postage costs related to sending orders - Save the time needed to key in orders

The accounts receivable general ledger balance will be wrong

If a company personnel erroneously applied a cash receipt to a wrong customer, which of the following is incorrect? - The accounts receivable general ledger balance will be wrong -The accounts payable subsidiary ledger balances are not impacted - The cash general ledger balance is still accurate - The accounts receivable subsidiary ledger balances are inaccurate

False

If a company uses the lockbox method to receive cash from customers, checks are mailed to the headquarter of the company and put in a locked security box. T or F?

Preparing the bank reconciliation

In order to ensure that all records are updated only for authorized transactions, appropriate individuals should be assigned all of the following duties, except: - Opening and closing all bank accounts - Approving electronic transfers of funds - Approving bank deposits - Preparing the bank reconciliation

Credit to purchase discount

In the cash disbursement process, if cash payment is sent to the vendor with a discount period, in a perpetual inventory system, all of the following record updated should be made, except: Credit to cash Credit to purchase discount Credit to inventory Debt to accounts payable

Update accounts receivable subsidiary ledger for the receipt

In the cash receipt process, after cash is received, the accounts receivable department needs to: -Deposit cash to the bank -Update accounts receivable subsidiary ledger for the receipt -All of the listed items are correct - Send a remittance advice back to the customer

Decrease inventory

In the purchasing process with perpetual inventory system, after receiving the vendor invoice, the company should perform all the following steps , except: -Update accounts payable subsidiary ledger -Validate vendors invoice by matching it with other source documents related to this purchase -Increase accounts payable - Decrease inventory

Physical access controls

Input controls in an IT system that processed sales transactions would include all of the following, except: -Programmed input validation checks -Physical access controls -Data preparation and error handling procedures -Batch control totals

Invalid or erroneous data entry

Input controls such as field check, validity check, limit check, reasonableness check, and completeness check can reduce the risk of: Invalid or erroneous data entry Unauthorized access Hackers Virus and worm attacks

Purchasing records and programs must be protected from unauthorized access

Internal control activities within the purchasing process, identified as segregation of duties, would include all of the following , except: -Responsibility for authorization, custody, and record keeping are to be assigned to different individuals -Duties related to requisitioning, ordering, purchase approval, receiving, inventory control, accounts payable, and general accounting are to be delegated to separate departments or individuals -Purchasing records and programs must be protected from unauthorized access -Complete separation of inventory custody from inventory accounting

The accounts payable employee who prepares the debit memo should also be responsible for handling inventory & approving return

Internal controls related to the purchase returns include all of the following, except: - Accounts payable records & data files should be restricted to those who are specifically authorized to approve or record the related purchase return - Special authorization should be required to officially reject and return the items - The accounts payable employee who prepares the debit memo should also be responsible for handling inventory & approving return - Debit memos should be issued on prenumbered forms in numerical sequence

Timely update accounts payable subsidiary ledger after debit memo is prepared

Payments may be made for items previously returned to the vendor. Which of the following internal control procedures can best reduce the above risk? -Retain copies of receiving documents -Compare accounts receivable subsidiary ledger with general ledger -Authorize purchase return -Timely update accounts payable sub ledger after debit memo is prepared

Preparing an invoice

Personnel who work in the receiving area should complete all the following processes, except: Preparing a receiving report Preparing an invoice Counting the goods received Inspecting goods received for damage

Match shipping documents with sales order data and invoice before recording the sale

Revenues may be recorded before the related shipment occurs. Which of the following internal control procedures can best reduce the above risk? -Require. customers to be authorized before making sales to them -Match shipping documents with receiving report and accounts receivable subsidiary ledger before recording the sale -Matching sales invoices with accounts receivable subsidiary ledger -Match shipping documents with sales order data and invoice before recording the sale

Price list

Sales orders are calculated based on current selling prices of the items sold. The source of these prices, which would include the entire set. of preestablished and approved prices for each product, is referred to as a(n): -Sales invoice -Packing slip -Price list -Customer purchase order

Periodic confirmation of customer account balances

Several problems have resulted recently as a result of recording sales invoices to the wrong customer accounts. Which of the following internal control procedures can best reduce the above risk? Field check Independent authorization for shipments Program change controls Periodic confirmation of customer account balances

Accounts payable subsidiary ledger

The accounting record that includes the details of amount owed to each vendor is called the: -Accounts receivable subsidiary ledger -Accounts payable subsidiary ledger -Purchases journal -Receiving log

Cash management

The careful oversight of cash balances, forecasted cash payments, and forecasted cash receipts to ensure that adequate cash balances exist to meet obligations is called: - Accounts payable management -Independent checks -Cash management -Cash disbursement

True

The expenditure process is similar to the revenue process, except that goods and cash flow in the opposite direction T or F?

Accounts payable subsidiary ledger

The internal control of the expenditure process requires vendor statements to be reviewed monthly and reconciled with ______. Inventory subsidiary ledger Fixed assets subsidiary ledger Accounts payable subsidiary ledger Accounts receivable subsidiary ledger

Omitted records for purchases

The internal control process of having the receiving reports prepared on prenumbered forms so that the sequence of receipts can be reviewed for proper recording will help to minimize the related risks of: Fictitious purchases Omitted records for purchases Invalid vendors Timing issues

Ensure that the receiving clerk actually takes the time to verify the accuracy of a delivery before accepting it

The main reason that receiving clerks are denied access to purchase order quantities and prices is to: - Ensure that the receiving clerk actually takes the time to verify the accuracy of a delivery before accepting it - Prevent fraudulent collusion between common carrier and the receiving clerk -Prevent receiving clerk from stealing delivered goods and manipulating the quantities and prices of received goods - N/A: the receiving clerk is NOT denied access to purchase order quantities and prices

Omitted transactions

The preparation of packing lists and shipping records on prenumbered forms will help minimize the related risk of: Omitted transactions Incorrect amounts Invalid sales Wrong customers

Making bank deposits

The recording responsibilities for cash receipts includes all of the following, except: - Posting subsidiary ledger totals to the general ledger - Maintaining a cash receipts journal - Making bank deposits - Updating accounts receivable records for individual customers

Purchase order

This form is prepared by the buyer and sent to the seller, to indicate the details of products or services that the seller will provide to the buyer. Information included on this form would be: products, quantities, and agreed-upon prices. -Purchase requisition -Vendors invoice -Sales invoice -Purchase order

Electronic data interchange

This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales and purchase documents electronically with a standard business format - Point of sale system -Customer relationship software -Electronic data interchange -E-commerce

Cutoff issue

When goods are received at end of accounting period, and the invoice is not received from the vendor until after the start of the following period, the company may not record all the liabilities. This is referred to as a(n): - Cutoff issue - Obligation referral - Channel stuffing - Liability deferral

A bank reconciliation is prepared on a monthly basis by the Treasurer's department

Which is not a control weakness of revenue process? - A bank reconciliation is prepared on a monthly basis by the Treasurer's department -Collections received by check are immediately forwarded unopened to the accounting department -Customer returns are presented to the sales department for preparing of a receiving report -A cash receipts journal is prepared by the Treasurer's department - Cash collections are deposited in the bank account on a weekly basis

Packing Slip

Which is not a document/report part of cash collection process? Bank Deposit slip Packing Slip Cash Receipts Journal Remittance Advice

Unused purchase orders and receiving reports are accounted for

Which of the following controls is NOT normally performed in accounts payable department? -The vendors invoice is matched with the related receiving report -Unused purchase orders and receiving reports are accounted for -Asset and expense accounts to be recorded are assigned -Vendor invoices are selected for payment

Accounts receivable aging report

Which of the following docs are prepared in order to more accurately estimate bad debt? Credit memo Bank reconciliation Sales order Accounts receivable aging report

The purchasing manager receives a shipment of raw materials that she had ordered

Which of the following events would NOT constitute the start of the purchasing process? -An accountant detects potential shortages in documented inventory quantities -A warehouse attendant notices a particularly low stock level -An operations manager becomes aware of additional quantities of material that will be needed to fulfill sales orders -The purchasing manager receives a shipment of raw materials that she had ordered

The accounts payable department selects items for payment

Which of the following is correct regarding the cash disbursement process? -The general ledger department sends payment to vendor -The shipping department sends a copy of shipping document to the cash disbursement department -The cash disbursement department manages and updates vendor subsidiary accounts -The accounts payable department selects items for payment

The ERS requires exact matching between goods and PO. All mismatches will be rejected

Which of the following is correct regarding the evaluated receipt settlement (ERS)? - The ERS requires exact matching between goods and PO. All mismatches will be rejected -When ERS is used, three-way matching should still be performed -The ERS does not allow receiving clerk to access PO - The ERS allows price to be flexibly modified after the buyer orders items

Purchase return account is credited to reflect the return

Which of the following is not a correct step in purchase return process under perpetual inventory system? -Accounts payable department updates the accounts subsidiary ledger - Inventory subsidiary ledger is updated to reflect returned items -Purchase return account is credited to reflect the return -Shipping department ships the items to the vendor

Shipping department

Which of the following is not involved in purchasing process? Warehouse Inventory control Accounts payable department Shipping department

Backup data

Which of the following is not one of the stated physical controls for inventory in a warehouse? Security guards Backup data Surveillance cameras Alarm systems

Preparing sales order and check inventory availability

Which of the following relationships does not violate the rules of segregation of duties? -Entering sales in the sales journal and handling inventory -Preparing goods for shipment and updating inventory records -Preparing sales order and check inventory availability -Credit authorization and preparation of the sales order