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The primary objective of the X cycle is to provide the right product in the right place at the right time for the right price. Also, the objective is to assure that the transaction is recorded correctly.

revenue

bad debts are part of the X cycle

revenue

this type of transaction is one that a business encounters on a regular, recurring basis; the volume of the transactions is so large that transactions and the related accounting activities become second nature to the employees responsible for handling them; specific authorization for each of these transactions is not necessary

routine transaction

this document is prepared and sent to the customer once the shipment has occurred; the document provides the details of the sale and requests payment

sales invoice

document that gives you justification to make an entry when the item is shipped

sales invoice (bill)

related documents for a: credit sale

sales invoice (bill)

a special journal that is used to record sales transactions and is periodically posted to the general ledger

sales journal

sales order entry is performed by the...

sales order department

the business processes that are common in C2C sales business are divided into three groups which are

sales processes, including ordering, delivering, and billing sales return processes cash collection processes

a chronological listing of shipments that allows management to track the status of sales and to answer customer inquiries regarding order status is called a

shipping log

If you're in invoicing department & want to make sure that you invoiced the customer for the correct amount, the X = the invoice amount. Triggers recognition of revenue.

shipping notice

key document that goes to the billing dept that says they can now bill customer. says "we have now shipped the item -- here's what we shipped, how we've shipped them"

shipping notice

In a system of proper internal controls, the same employee should not be allowed to prepare the voucher packages and

sign the check

internal controls related to the purchase returns would include

special authorization should be required to officially reject and return the items debit memos should be issued on pre-numbered forms in numerical sequence accounts payable records and data files should be restricted on those who are specifically authorized to approve or record the related purchase return

the internal control activities within the purchasing process related to authorization of transactions would include

specific individuals are to be authoritative responsibility for preparing purchase requisitions and purchase orders which would include which items to purchase, how many items, and which vendor

the internal control process of requiring physical controls in the warehouse and receiving areas, in order to limit access to inventory items, will help minimize the risk of

stolen goods

The auditor's test of the accuracy of monetary amounts of transactions and account balances is known as:

substantive tests

the stated physical controls for inventory in a warehouse

surveillance cameras alarm systems security guards

in order to help safeguard the availability in an electronic business environment, a company should implement controls such as business continuity planning, backup data and systems, in order to reduce the risk of

system failures

A detailed study fo the current system to identify weaknesses to improve upon and strengths that should be maintained is referred to as

system survey

No payments should be made until the purchase order, receiving report, and invoice are match to ensure

the goods were received in good condition

examples of characteristics that indicate company may be more risky with respect to the revenue process include

the pricing structure is complex or is based on estimates there is a large volume of transactions carried out the company decides on a single or on very few customers

a computer software technique in which the computer software matches an invoice to its related purchase order and receiving report

three way matching

the POS systems for retail food service use X to input sales rather than bar codes

touch screens

the information from a purchase must flow into the purchase recording systems, the accounts payable and cash disbursement systems, and the inventory tracking systems; in an IT accounting system, these recordings and processing systems are called

transaction processing systems

the risks that may affect the revenue and cash collection processes include

transactions may have been recorded in the wrong customer account transactions may be recorded in the wrong amount transactions may not have been accumulated or transferred to the accounting records correctly

Credit manager has the ability to give something value. They generally report to the X (who is over the custody function)

treasurer

On the designated pay day, signed paychecks are distributed to employees by an independent pay master. Any check unclaimed should go back to the:

treasurer

in order to help safeguard the security and confidentiality in an electronic business environment, a company should implement controls such as user ID, password, log-in procedures, access levels, and authority tables in order to reduce the risk of

unauthorized access

What internal control procedure(s) would provide protection against the following threats? The company's Web site is unavailable for seven hours because of a power outage.

uninterruptible power supply (UPS)

The risks that may affect the revenue and cash collection processes include

valid transactions may not have been omitted from the records transactions may not have been recorded in a timely manner recorded transactions may not be valid or complete

This third-party network provides other valuable services such as translation and encryption of the EDI data and authentication of a valid and authorized training partner

value added networks

balance sheet approach (allowance method)

% of AR

Which allowance approach? Sales = $100,000 -- we estimate 2% will go bad Matching isn't perfect b/c we don't know for sure $2,000 will go bad - but here we are attempting to get them in the right time period

% of sales

income statement approach (allowance method)

% of sales

(3) ways to handle the allowance method

(1) % of sales (2) % of AR (3) aging

(3) advantages of EDI systems in the revenue cycle

(1) Elimination of costs related to keying and keying errors (2) Elimination of the time needed to key in orders (3) Elimination of mail delays

what are (2) types of POS systems

(1) bar code labels - using the universal product code (UPC) (2) touch screen input systems

(2) methods for writing off bad-debt

(1) direct write-off (2) allowance

(2) steps in billing

(1) invoicing (2) updating AR

(3) types of invoicing methods

(1) open invoice (2) balance forward (3) cycle billing

(2) steps in the "filling orders & shipping" process :

(1) picking & packing the order (2) shipping the order

(2) documents that are involved in picking & packing the order

(1) picking ticket (2) packing slip

(4) steps in the revenue cycle

(1) sales order entry (2) filling orders & shipping (3) billing (4) cash collection

(2) documents that are involved in shipping the order

(1) shipping notice (2) bill of lading

(3) steps in the sales order entry process

(1) take customer's order (2) check customer's credit (3) check inventory availability

when a debt goes bad - you DR BDE and CR AR; not acceptable under GAAP b/c you're not matching expenses w/revenues (when you made the sale); simplest method; (a) direct write-off method (b) allowance method

(a) direct write-off method

when you send me a check you're going to tell me which invoices that check applies to (a) open invoice method (b) balance forward method (c) cycle billing

(a) open invoice method

required by GAAP. IRS doesn't like this method b/c you're estimating expenses. (a) direct write-off method (b) allowance method

(b) allowance method

when I get your check - I don't go in and try to tie it to specific invoices - I just apply your check to your total balance (a) open invoice method (b) balance forward method (c) cycle billing

(b) balance forward method

where I spread the billing out so that it doesn't hit me all at once - spread out. "We're going to bill 1/3 of the invoices in the first 10 days.. etc." spreading out the work load and cash flow. Money will come in more evenly throughout the month. (a) open invoice method (b) balance forward method (c) cycle billing

Based on section 203 of SOX Act of 2002 the lead partner on a public company audit must rotate off the engagement after?

5 years

1. Within the revenue processes, a signed approval of a sales order indicates all of the following except: A. The date of delivery. B. The sale is to an accepted customer. C. The customer's credit has been approved. D. The sales price is correct.

10. Immediately upon receiving checks from customers in the mail, a responsible employee working in an environment of adequate internal control should prepare a listing of receipts and forward it to the company's cashier. A copy of this cash receipts listing should also be sent to the company's: A. Treasurer for comparison with the monthly bank statement. B. Internal auditor for investigation of any unusual transactions. C. Accounts receivable clerk for updating of the accounts receivable subsidiary ledger. D. Bank for comparison with deposit slips.

103. Important characteristics of electronic data interchange (EDI) include all of the following, except: A. Sales register is used to record all transactions. B. Inter-company refers to two or more companies conducting business electronically. C. Computer-to-computer aspect indicates that each company's computers are connected via a network. D. A standard business format is necessary so that companies can interact and trade with a variety of buyers and sellers.

106. This section of the common forms used as the standard format in EDI data transmission contains data about the file or transmission and identify the end of a particular transaction. A. Header and Trailer Data B. Labeling Interchanges C. Data Segments D. Footer Data

110. A control that limits the risk of network break-ins is the coding of data that makes data unreadable to those without the appropriate key. This process does not stop the breaches, but will make the data useless. A. Encryption B. Encoding C. Repudiation D. Hacking

13. When a company sells items over the Internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be a(n): A. Availability risk. B. Processing integrity risk. C. Security risk. D. Confidentiality risk.

14. 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 pre-established and approved prices for each product, is referred to as a(n): A. Price list B. Purchase order C. Packing slip D. Pick list

19. When a sale occurs, the information resulting from that sale must flow into the sales recording systems, the accounts receivable and cash collection systems, and the inventory tracking systems. In IT accounting systems, these recording and processing systems are referred to as: A. Transaction Processing Systems B. Revenue and Cash Processing Systems C. Point of Sale System D. E-business System

2. Which of the following displays the correct order of operations within the Sales Process? A. Verify Prices, Prepare Sales order, verify credit limit, verify item is in stock B. Verify Prices, Verify Credit limit, Prepare Sales order, , verify item is in stock C. Verify Prices, Verify Credit limit, verify item is in stock, prepare sales order D. Verify item is in stock, verify Prices, verify credit limit, prepare Sales order

20. This document is prepared and sent to the customer once the shipment has occurred. The document provides the details of the sale and requests payment. A. Sales Invoice B. Accounts Receivable Statement C. Bill of Lading D. Sales Order

22. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions recorded by the wrong company. B. Valid transactions may have been omitted from the records. C. Transactions may not have been recorded in a timely manner. D. Recorded transactions may not be valid or complete.

25. The internal control activity related to the adequate records and documents, related to sales, includes which of the following? A. Those responsible for recording sales should ensure that the supporting documentation is retained and organized. B. Information systems duties included in the revenue process includes the preparation of sales orders and shipping logs. C. All records are to be prepared by someone other than the person who has custody of the assets. D. The authorization process is to remain separate from the recording process.

27. 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): A. Price list B. Purchase order C. Packing slip D. Pick list

3. The purpose of tracing shipping documents to prenumbered sales invoices would be to provide evidence that: A. Shipments to customers were properly invoiced. B. No duplicate shipments or billings occurred. C. Goods billed to customers were shipped. D. All prenumbered sales invoices were accounted for.

3. When a sale occurs, the information resulting from that sale must flow into the sales recording systems, the accounts receivable and cash collection systems, and the inventory tracking systems. In IT accounting systems, these recording and processing systems are referred to as: A. Transaction Processing Systems B. Revenue and Cash Processing Systems C. Point of Sale System D. E-business System

36. The internal control activity related to the adequate records and documents, related to sales, includes which of the following? A. Those responsible for recording sales should ensure that the supporting documentation is retained and organized. B. Information systems duties included in the revenue process includes the preparation of sales orders and shipping logs. C. All records are to be prepared by someone other than the person who has custody of the assets. D. The authorization process is to remain separate from the recording process.

40. Examples of characteristics that indicate a company may be more risky with respect to the revenue process include all of the following, except: A. Changes in sales prices or customers are infrequent. B. The pricing structure is complex or is based on estimates. C. There is a large volume of transactions is carried out. D. The company depends on a single or on very few customers.

48. When a sale occurs, the information resulting from that sale must flow into the sales recording systems, the accounts receivable and cash collection systems, and the inventory tracking systems. In IT accounting systems, these recording and processing systems are referred to as: A. Transaction Processing Systems B. Revenue and Cash Processing Systems C. Point of Sale System D. E-business System

51. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions recorded by the wrong company. B. Valid transactions may have been omitted from the records. C. Transactions may not have been recorded in a timely manner. D. Recorded transactions may not be valid or complete.

56. 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): A. Price list B. Purchase order C. Packing slip D. Pick list

56. The custody responsibilities for cash receipts includes all of the following, except: A. Updating accounts receivable records B. Opening mail C. Preparing a list of collections D. Handling receipts of currency and checks

6. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions recorded by the wrong company. B. Valid transactions may have been omitted from the records. C. Transactions may not have been recorded in a timely manner. D. Recorded transactions may not be valid or complete.

6. Under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the: A. Receiving Clerk B. Sales Clerk C. Purchasing Clerk D. Inventory Control Clerk

61. This document is prepared and sent to the customer once the shipment has occurred. The document provides the details of the sale and requests payment. A. Sales Invoice B. Accounts Receivable Statement C. Bill of Lading D. Sales Order

65. The internal control activity related to the adequate records and documents, related to sales, includes which of the following? A. Those responsible for recording sales should ensure that the supporting documentation is retained and organized. B. Information systems duties included in the revenue process includes the preparation of sales orders and shipping logs. C. All records are to be prepared by someone other than the person who has custody of the assets. D. The authorization process is to remain separate from the recording process.

69. Examples of characteristics that indicate a company may be more risky with respect to the revenue process include all of the following, except: A. Changes in sales prices or customers are infrequent. B. The pricing structure is complex or is based on estimates. C. There is a large volume of transactions is carried out. D. The company depends on a single or on very few customers.

73. A document prepared that lists the chronological sequence of all returned items is referred to as a(n): A. Receiving log B. Receiving report C. Invoice D. Packing list

74. Important characteristics of electronic data interchange (EDI) include all of the following, except: A. Sales register is used to record all transactions. B. Inter-company refers to two or more companies conducting business electronically. C. Computer-to-computer aspect indicates that each company's computers are connected via a network. D. A standard business format is necessary so that companies can interact and trade with a variety of buyers and sellers.

77. This section of the common forms used as the standard format in EDI data transmission contains data about the file or transmission and identify the end of a particular transaction. A. Header and Trailer Data B. Labeling Interchanges C. Data Segments D. Footer Data

78. Circumstances within a company, related to sales returns, that indicate a high level of risk include all of the following, except: A. Returns are received a one location with credit memos issued at the same location. B. Quantities of products returned are often difficult to determine. C. There is a high volume of credit memo activity. D. Returns are received by consignees or under other arrangements not directly controlled by the company.

82. A special journal used to record all cash collections is called a(n): A. Cash Receipts Journal B. Remittance Advice C. Check Register Journal D. Customer Subsidiary Journal

85. The custody responsibilities for cash receipts include all of the following, except: A. Updating accounts receivable records B. Opening mail C. Preparing a list of collections D. Handling receipts of currency and checks

92. The separation of the custody of cash from the accounts receivable record keeping will help to minimize the related risk of: A. Invalid cash receipts B. Incorrect amounts C. Invalid transactions D. Duplicate transactions

97. This type of highly integrated IT system incorporates electronic processing of sales-related activities and, generally, the sales processes are transacted over the internet. A. E-commerce B. Virtual commerce C. Electronic data interchange D. Point of sale

A company should check inventory quantities before accepting a sales order for all the following reasons except to A) verify the accuracy of the perpetual inventory records. B) inform the customer about availability and delivery times. C) know which items may need to be back ordered. D) update inventory records to reduce the quantity available by the number of items ordered

A document typically encountered in the revenue cycle that is both an output document and a source document is the A) sales invoice. B) customer purchase order. C) sales order. D) packing slip.

A monthly statement sent to customers serves a control purpose by A) providing an opportunity for customers to verify the balance owed and activity on the account. B) triggering the process to record a customer payment. C) summarizing invoices and amounts due for customers. D) reminding customers of the balance due and due date.

A sales clerk at an electronics store scanned the bar code for a low cost set of headphones and then substituted a high cost set of headphones for his friend, who paid the lower price. Which of the following controls would best help to prevent this sort of fraud? A) Use of RFID tags B) Physical inventory count C) Segregation of duties D) Limited physical access to bar codes

A way to incorporate the advantages of Electronic Data Interchange with the Electronic Funds Transfer is A) Financial Electronic Data Interchange. B) e-commerce. C) to use procurement cards. D) an electronic lockbox

Accounting recognizes a sale when A) inventory becomes the legal property of the customer. B) cash is received from the customer. C) a sales order is approved by sales, inventory control, and credit departments. D) inventory is removed from the warehouse

Consider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat? A) The company may be shipping the wrong merchandise. B) The company may be shipping the wrong quantities of merchandise. C) The company may be shipping orders to the wrong address. D) All of the above threats may apply to this scenario

During the sales order entry process, a ________ is performed to verify that each transaction record contains all appropriate data items. A) completeness test B) redundant data check C) field check D) reasonableness test

For sales returns, the least effective control to prevent fraudulent processing of a credit memo is to A) reconcile total of credit memos to total debits posted to customers' subsidiary ledgers. B) require approval for each credit memo by the credit manager. C) sequentially prenumber all credit memos and perform a sequence check at the end of each day. D) match each credit memo with a receiving report

Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates. A) inventory records B) cash receipts C) credit approval decisions D) exception reports

Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of a A) picking ticket. B) bill of lading. C) packing slip. D) sales order.

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 pre-established and approved prices for each product, is referred to as a(n): A. Price list B. Purchase order C. Packing slip D. Pick list

Separating the shipping and billing functions is designed to reduce the threat of A) failure to bill customers. B) billing customers for wrong quantities. C) billing customers before merchandise has been shipped. D) shipping the wrong merchandise

The accounts receivable management method typically used by credit card companies is A) balance forward. B) postbilling. C) monthly statement. D) open-invoice.

The activities involved in soliciting and processing customer orders within the revenue cycle are known as the ________. A) sales order entry process B) shipping order process C) revenue process D) marketing process

The document a customer returns with their payment and that identifies the source and the amount of the payment is called a A) remittance advice. B) remittance list. C) credit memorandum. D) debit memorandum

The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the following error message popped up: "Did you mean to enter a quantity of 1000 for your order?" This message is the result of a A) reasonableness test. B) validity check. C) limit check. D) closed-loop verification.

The purpose of tracing shipping documents to prenumbered sales invoices would be to provide evidence that A. Shipments to customers were properly invoiced. B. No duplicate shipments or billings occurred. C. Goods billed to customers were shipped. D. All prenumbered sales invoices were accounted for.

This document is prepared and sent to the customer once the shipment has occurred. The document provides the details of the sale and requests payment. A. Sales Invoice B. Accounts Receivable Statement C. Bill of Lading D. Sales Order

Under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the: A. Receiving Clerk B. Sales Clerk C. Purchasing Clerk D. Inventory Control Clerk

When a company sells items over the Internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be a(n): A. Availability risk. B. Processing integrity risk. C. Security risk. D. Confidentiality risk.

When a customer pays off the balance on an invoice, the payment is credited to the ________ file. A) customer master B) sales transaction C) cash receipts master D) All of the above are correct

When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? A) The customer's available credit should be checked. B) The sales order should be created and written to a file. C) Shipping should be notified of an order in process. D) A picking list should be generated for the warehouse

When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts. A) cashier; treasurer B) cashier; controller C) accountant; treasurer D) accountant; controller

Which document should always be included with a merchandise shipment to a customer? A) Packing slip B) Picking ticket C) Remittance advice D) Sales invoice

Which is the best control to prevent invoicing customers for the quantity ordered, which was more than the quantity shipped due to items on backorder? A) Use the information from the packing slip to prepare the sales invoice. B) Use the information from the picking ticket to prepare the sales invoice. C) Use the information from the bill of lading to prepare the sales invoice. D) Use the information from the sales order to prepare the sales invoice.

Which of the following displays the correct order of operations within the Sales Process? A. Verify Prices, Prepare Sales order, verify credit limit, verify item is in stock B. Verify Prices, Verify Credit limit, Prepare Sales order, , verify item is in stock C. Verify Prices, Verify Credit limit, verify item is in stock, prepare sales order D. Verify item is in stock, verify Prices, verify credit limit, prepare Sales order

Which of the following documents normally triggers the billing process in the revenue cycle? A) Packing slip received from the shipping department B) Sales order received from the sales department C) Picking ticket received from the sales department D) Journal voucher received from the shipping department

Which of the following documents would normally trigger the process to record a customer payment? A) Remittance advice B) Customer monthly statement C) Deposit slip D) Sales invoice

Which of the following is a preventive control? a.) Training b.) Log analysis c.) CIRT d.) Virtualization

Which of the following is not one of the controls for the mail room where customer payments are commingled with other mail? A) Requiring the controller to be personally present when mail is received and opened B) Preparing a remittance list as mail is opened C) Restrictively endorsing checks when received D) Requiring two mail room clerks to open mail together

Which of the following techniques is the most effective way for a firewall to use to protect the perimeter? a.) Deep packet inspection b.) Packet filtering c.) Access control list d.) All of the above are equally effective.

The sales and cash collections process begins when

A customer places an order with the company

Authorizing a credit memo for a sales return when the goods were never actually returned.

A receiving report should be required before a credit for sales returns is issued. The system should be configured to block issuance of credit memos without the required documentation that the goods have been returned.

Nonrepudiation means that:

A user cannot deny any particular act that he or she did on the IT system

Within the revenue processes. a signed approval of a sales order indicates all of the following except: A. Date of Delivery B. Sale to an Accepted Customer C. Approval of Customers Credit D. Correct Sales Price

A. Date of Delivery

Under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the: a. Receiving Clerk b. Sales Clerk c. Purchasing Clerk d. Inventory Control Clerk

A. Receiving Clerk

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

A. Shipments to customers were properly invoiced

Which of the given departments will immediately adjust the vendor account for even purchase transaction so that the company will know the correct amount owed to the vendor?

Accounts payable

Which department is generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts?

Accounts payable department

What internal control procedure(s) would provide protection against the following threats? Customers are billed for the quantity ordered, but the quantity shipped is actually less because some items have been back ordered

Amount should have been compared to SHIPPING NOTICE

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchasing transactions?

Are prenumbered purchase orders, receiving reports, and vouchers use, and are the entire sequences accounted for?

The process of user identification to ensure that only authorized users are accessing the IT system, which occurs through the use of user ID, password, and other unique identifiers is called:

Authentication

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:

Authorization of transactions from the custody of the related assets

10. The sales and cash collections process begins when: A. Merchandise is shipped to a customer B. A customer places an order with the company C. Merchandise is purchased D. A vendor places an order with the company

101. The risks of e-commerce, or e-business, include all of the following, except: A. Confidentiality B. Accuracy C. Security D. Processing Integrity

105. The standard format for common forms used in the United States for EDI data transmission is divided into three parts. Which of the following is one of those "parts"? A. Availability Segment B. Labeling Interchanges C. Security Trailer D. Processing Data

108. EDI systems have many advantages within the revenue and cash collection processes. Which of the following is not one of those benefits? A. Reduction or elimination of data keying. B. Trading partners gaining access to data. C. Elimination of postage costs. D. Competitive advantage through better customer service.

111. This occurs when the IT system automatically makes a list of users and the actions they take within the IT system. A. Control Totals B. Transaction Logging C. Encryption Keys D. Acknowledgment

114. This term refers to moving the current accounting period forward to include sales that correctly occur in a future period. This activity occurs so that the selling company can inflate their sales in the current period. A. Channel stuffing B. Leaving sales open C. Shipping reversal D. Sales deferral

12. When a company sells items over the Internet, it is usually called e-commerce. There are many IT risks related to Internet sales. The risk of invalid data entered by a customer would be a(n): A. Availability risk. B. Processing integrity risk. C. Security risk. D. Confidentiality risk.

18. The terms of agreement between the company and the common carrier are documented in a(n): A. Pick List B. Bill of Lading C. Invoice D. Packing Slip

21. The business processes that are common in company-to-company sales business are divided into three groups. Which of the following is not one of those groups? A. Sales processes, including ordering, delivery, and billing B. Purchase of inventory, including ordering, delivery, and billing C. Sales Returns processes D. Cash Collection processes

23. When a sales transaction has been authorized, by the signature of the designated employee, it means that the designated employee has done all of the following, except: A. Verified the sale is to an accepted customer B. The vendor's credit has been approved C. The price is correct D. Approval documented by a signature or initials of the designated employee

24. Which of the following relationships does not violate the rules of segregation of duties? A. Credit authorization and preparation of the sales order. B. Preparation of the sales order and sales invoice. C. Preparing goods for shipment and accounting for inventory. D. Entering sales in the sales journal and handling the inventory

30. The terms of agreement between the company and the common carrier are documented in a(n): A. Pick List B. Bill of Lading C. Invoice D. Packing Slip

34A1. When a sales transaction has been authorized, by the signature of the designated employee, it means that the designated employee has done all of the following, except: A. Verified the sale is to an accepted customer B. The vendor's credit has been approved C. The price is correct D. Approval documented by a signature or initials of the designated employee

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

43. The separation of the responsibility for the authorization of new customers from the custody of inventory will help to minimize the related risk of: A. Invalid sales B. Fictitious customers C. Incorrect amounts D. Timing issues

47. The policies and procedures that employees follow when completing the sale, capturing customer data and sales quantities, and routing the resulting sales documents to the right departments within the company are referred to as: A. Transactions B. Processes C. Posting D. Systems

48. The segregation of duties related to sales returns would ideally separate the function of performing the credit memo activity and all of the following, except: A. Credit approval B. Approve the credit memos C. Billing D. Data entry

5. The business processes that are common in company-to-company sales business are divided into three groups. Which of the following is not one of those groups? A. Sales processes, including ordering, delivery, and billing B. Purchase of inventory, including ordering, delivery, and billing C. Sales Returns processes D. Cash Collection processes

50. The business processes that are common in company-to-company sales business are divided into three groups. Which of the following is not one of those groups? A. Sales processes, including ordering, delivery, and billing B. Purchase of inventory, including ordering, delivery, and billing C. Sales Returns processes D. Cash Collection processes

51. The separation of the custody of inventory from the accounts receivable record keeping will help to minimize the related risk of: A. Incorrect amounts B. Invalid returns C. Fictitious customers D. Timing issues

54. The sales and cash collections process begins when: A. Merchandise is shipped to a customer B. A customer places an order with the company C. Merchandise is purchased D. A vendor places an order with the company

58. Independent checks and reconciliations, related to cash receipts, include all of the following, except: A. Cash counts should occur on a surprise basis and be conducted by someone not responsible for cash receipts functions. B. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft. C. Physical count of cash needs to be conducted from time to time in order to compare actual cash on hand with the amounts in the accounting records. D. Daily bank deposits should be compared with the detail on the related remittance advice and in the cash receipts journal.

59. The terms of agreement between the company and the common carrier are documented in a(n): A. Pick List B. Bill of Lading C. Invoice D. Packing Slip

60. The following circumstances may indicate risks related to cash collections, except: A. High volume of cash collections B. Centralized cash collections C. Lack of consistency in the volume or source of collections D. Presence of cash collections denominated in foreign currencies

64. Which of the following relationships does not violate the rules of segregation of duties? A. Credit authorization and preparation of the sales order. B. Preparation of the sales order and sales invoice. C. Preparing goods for shipment and accounting for inventory. D. Entering sales in the sales journal and handling the inventory.

66X. General controls of the IT system would include all of the following, except: A. Authentication of users B. Accuracy C. Physical access controls D. Business continuity planning

67. Application controls of the IT system would include: A. Availability B. Accuracy and Completeness C. Security D. Processing Integrity

72. The risks of e-commerce, or e-business, include all of the following, except: A. Confidentiality B. Accuracy C. Security D. Processing Integrity

72. The separation of the responsibility for the authorization of new customers from the custody of inventory will help to minimize the related risk of: A. Invalid sales B. Fictitious customers C. Incorrect amounts D. Timing issues

75. A document prepared to prepare a record of the sales return and to adjust the amount of the customer's credit status is called a(n): A. Receiving log B. Credit memorandum C. Sales invoice D. Sales journal

76X. The standard format for common forms used in the United States for electronic data interchange (EDI) data transmission is divided into three parts. Which of the following is one of those "parts"? A. Availability Segment B. Labeling Interchanges C. Security Trailer D. Processing Data

77. The segregation of duties related to sales returns would ideally separate the function of performing the credit memo activity and all of the following, except: A. Credit approval B. Approve the credit memos C. Billing D. Data entry

80. The separation of the custody of inventory from the accounts receivable record keeping will help to minimize the related risk of: A. Incorrect amounts B. Invalid returns C. Fictitious customers D. Timing issues

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

85X. This term refers to moving the current accounting period's cut-off date forward to include sales that correctly occur in a future period. This activity occurs so that the selling company can inflate their sales in the current period. A. Channel stuffing B. Leaving sales open C. Shipping reversal D. Sales deferral

87. Independent checks and reconciliations, related to cash receipts, include all of the following, except: A. Cash counts should occur on a surprise basis and be conducted by someone not responsible for cash receipts functions. B. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft. C. Physical count of cash needs to be conducted from time to time in order to compare actual cash on hand with the amounts in the accounting records. D. Daily bank deposits should be compared with the detail on the related remittance advice and in the cash receipts journal.

89. The following circumstances may indicate risks related to cash collections, except: A. High volume of cash collections B. Centralized cash collections C. Lack of consistency in the volume or source of collections D. Presence of cash collections denominated in foreign currencies

91. The separation of the responsibility for custody of cash from the responsibility for reconciling the bank accounts will help to minimize the related risk of: A. Wrong customers B. Incorrect amounts C. Invalid bank account D. Invalid transactions

95. General controls of the IT system would include all of the following, except: A. Security B. Accuracy C. Availability D. Confidentiality

96. Application controls of the IT system would include: A. Availability B. Accuracy and Completeness C. Security D. Processing Integrity

A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method. A) monthly statement B) open-invoice C) balance forward D) cycle billing

A serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable control procedure that address this exposure? A) shipping errors; reconciliation of sales order with picking ticket and packing slip B) theft of cash; segregation of duties and minimization of cash handling C) making sales that turn out to be uncollectible; force sales people to make collection calls on customers with past due balances D) poor performance; preparation and review of performance reports

All of the following edit checks for online editing of accounts receivable transactions would probably be included except A) validity checks on customer ID and invoice numbers. B) check digit verification on the amount of the sale. C) closed loop verification on the customer ID. D) field checks on the values in dollar fields

An arrangement where a bank receives customer payments through the postal system, scans the remittance advices, and transmits payment data to the business electronically is known as A) e-commerce. B) an electronic lockbox. C) electronic funds transfer (EFT). D) electronic data interchange (EDI).

Closing entries A. Close all of the general ledger accounts. B. End the fiscal period. C. Close all of the subsidiary ledger accounts. D. Are journalized in the subsidiary ledgers.

Customers that send their payments electronically directly to the company's bank are using A) electronic data interchange (EDI). B) electronic funds transfer (EFT). C) procurement cards. D) an electronic lockbox

Equity is considered: A. Bonds and loans with payment schedules several years in the future. B. Stocks. C. Loans with payment due in the near future. D. All of the above, A, B, and C, are examples of long-term debt.

How is credit approval generally handled for established customers with a documented payment history? A) Specific authorization by the credit manager B) General authorization by a sales clerk C) A new credit application is requested D) A formal credit check should be made for each sale

In a revenue cycle with proper controls, the ________ who reports to the ________, is not involved in any cash handling activities. A) accounts receivable clerk; treasurer B) accounts receivable clerk; controller C) cashier; controller D) cashier; treasurer

Retail stores could send their orders directly to the manufacturer's sales order system in a format that would eliminate the need for data entry, using A) Vendor Managed Inventory. B) Electronic Data Interchange. C) Point Of Sale. D) Electronic Funds Transfer.

The benefits of a lockbox arrangement with a bank are maximized when A) the bank is located nearby to the company, so remittance advices can be delivered to the company every day. B) several banks around the country are used, in order to minimize the time payments spend in the mail. C) an arrangement is made with only one bank, so all remittance advices can be batched for processing. D) the bank deposits the payments and accesses the customer's information system to record the payments.

The sales and cash collections process begins when: A. Merchandise is shipped to a customer B. A customer places an order with the company C. Merchandise is purchased D. A vendor places an order with the company

The shipping department at Squishy Things Toy Company follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the agreements are documented on A) picking tickets. B) bills of lading. C) packing slips. D) RFID tags.

The terms of agreement between the company and the common carrier are documented in a(n): A. Pick List B. Bill of Lading C. Invoice D. Packing Slip

This document is a legal contract that defines responsibility for goods that are in transit. A) packing slip B) bill of lading C) picking list D) back order

Two documents usually accompany goods shipped to a customer. What are the two documents? A) a bill of lading and an invoice B) a packing slip and a bill of lading C) an invoice and a packing slip D) an invoice and a sales order

What is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded? A) General authorization to approve the order is given to sales clerks. B) Specific authorization must be granted by the credit manager. C) The sale should be rejected. D) The sales clerk should order a report from a credit bureau before approving the order

When a company sells items over the Internet, it is usually called e-commerce. There are many IT risks related to Internet sales. The risk of invalid data entered by a customer would be a(n): A. Availability risk. B. Processing integrity risk. C. Security risk. D. Confidentiality risk.

Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service?

Which of the following combinations of credentials is an example of multifactor authentication? a.) Voice recognition and a fingerprint reader b.) A PIN and an ATM card c.) A password and a user ID d.) All of the above

Which of the following is a corrective control designed to fix vulnerabilities? a.) Virtualization b.) Patch management c.) Penetration testing d.) Authorization

Which of the following relationships does not violate the rules of segregation of duties? A. Credit authorization and preparation of the sales order. B. Preparation of the sales order and sales invoice. C. Preparing goods for shipment and accounting for inventory. D. Entering sales in the sales journal and handling the inventory

Which of the following statements is true regarding internal controls of capital and investment processes? A. Internal controls aimed at preventing and detecting employee fraud in capital and investment processes are not as effective. B. Top management fraud, rather than employee fraud, is more likely to occur. C. Any fraud is likely to involve manipulating capital and investment processes. D. Because of top management oversight, the auditor need not review these processes.

Which of the following statements is true? A. Routine transactions are recorded in the general journal. B. Nonroutine transactions are entered in the general journal. C. Nonroutine transactions are recorded in a subsidiary ledger. D. Nonroutine transactions are recorded in a special journal.

Theft of checks by the mailroom clerk, who then endorsed the checks for deposit into the clerk's personal bank account.

Balances over a specified length of time (such as 60 days). If not, the sale would be approved. If they had a past-due balance, a notice could be sent to the credit manager who could review the sale and make a decision about extending additional credit.A credit limit check would not be sufficient, because a customer could have a balance below the credit limit but be past due. A computer system could be programmed to check both credit limit and past due accounts and authorize sales. Sales not passing either the credit limit or the past due test would be sent to the credit manager for a decision. d. Authorizing a credit memo for a sales return when the goods were never actually returned.A receiving report should be required before a credit for sales returns is issued. The system should be configured to block issuance of credit memos without the required documentation that the goods have been returned.e. Writing off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer.The problem usually occurs because the same individual writes off accounts and processes cash payments. Therefore, the best control procedure to prevent this problem is to separate the function of authorizing write-offs of uncollectible accounts from the function of handling collections on account.f. Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items.Shipping personnel should be required to record the actual quantity shipped on the order document and/or enter the quantity shipped into the accounting system, in order that bills can be prepared based upon the quantity shipped rather than the quantity ordered. The system should be configured to generate invoices automatically based on the quantity shipped.g. Theft of checks by the mailroom clerk, who then endorsed the checks for deposit into the clerk's personal bank account.In order to cover up this theft, the mailroom clerk has to be able to alter the accounts receivable records. Otherwise, a customer who is subsequently notified that they are past due will complain and provide proof that they sent in payment. Therefore, the critical control is to segregate duties so that whoever opens the mail does not have the ability to maintain customer accounts.If accounts receivable updates the records based on a cash receipts pre-list instead of the actual checks, the mailroom clerk could conceivably lap payments. To prevent this, the cash receipts pre-list could be compared to the checks before the list is sent to accounts receivable. The checks should not be sent to accounts receivable as the accounts receivable clerk could perform the lapping.Other deterrents used to deter theft of checks by the mailroom clerk include having two people open the mail, using video cameras to tape the check opening process, and utilizing a bank lockbox.

In order to serve on an organization's Audit Committee, the individual must

Be a member of the board of directors

Document used to establish responsibility for shipping goods via a third party

Bill of lading

which of the following has an ethical obligation to establish the proper tone at the top, strong internal controls, and high ethical standards

Board of Directors and Management

why do we sell on credit?

By selling on credit we believe that we are going to get more sales. Even though we might have some bad debts, it's worth it. Bad debts are an expense of doing business.

100. The advantages of e-commerce, or e-business, include all of the following, except: A. Reduced cost through lower marketing, employee, and paperwork costs. B. Shorter sales cycles C. Repudiation of sales transactions D. Increased accuracy and reliability of sales data

107. Because it can be expensive to develop and maintain a system that links two companies directly, the companies often use a third-party network. This third-party network provides other valuable services such as translation and encryption of the EDI data and authentication of a valid and authorized training partner. These third-party networks are called: A. EDI Mailboxes B. American National Standards Provider C. Value Added Networks D. Secured EDI Networks

11. The form, or source document, that conveys the details about a customer's order, prepared by the customer, is referred to as: A. Sales Order B. Sales Invoice C. Purchase Order D. Purchase Invoice

112. The Point-of-sales (POS) systems capture all relevant sales data at the point of sale - the cash register. The data that is captured includes all of the following, except: A. Prices are determined by accessing inventory and price list data B. Sales revenue is recorded C. Ordering for low-inventory items D. Inventory values are updated

113. Advantages to management and accountants, as the result of the point-of-sale systems, include all of the following except: A. Bar code scanning eliminates the need to manually enter product codes, quantities, or prices. B. Real-time update of cash, sales, and inventory records allows for immediate analysis of sales trends, inventory needs, and cash on hand. C. List prices can be changed by the check-out clerks to take advantage of any price changes. D. Credit card authorization during the sale save time and help prevent credit card fraud.

13. Which of the following documents will be received by a customer after a sale? A. shipping log B. pick list C. monthly account statement D. purchase order

15. An IT system that uses touch screens, bar coded products, and credit card authorization during the sale is called a(n): A. Electronic data interchange system. B. E-commerce system. C. Point of sales system. D. E-payables system.

2. An example of an independent verification in the sale process is: A. Preparation of packing lists on prenumbered forms. B. Initialing the sales order. C. Proof of recorded dates, quantities, and prices on an invoice. D. Physical controls in record storage areas.

20. The business processes that are common in company-to-company sales business types include all of the following, except: A. Collect order data B. Record receivable and bill the customer C. Update affected records, such as accounts payable and cash D. Handle any product returns from the customer

21. A special journal that is used to record sales transactions and is periodically posted to the general ledger. A. General Journal B. Subsidiary Journal C. Sales Journal D. Accounts Receivable Journal

23. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions may have been recorded in the wrong customer account. B. Transactions may be recorded in the wrong amount. C. Invalid transactions may have been omitted from the records. D. Transactions may not have been accumulated or transferred to the accounting records correctly.

26. Which of the following is not one of the stated physical controls for inventory in a warehouse? A. Surveillance Cameras B. Alarm Systems C. Backup Copies D. Security Guards

29. This item documents the quantities and descriptions of items ordered. Items from this document should be pulled from the warehouse shelves and packaged for the customer. A. Packing Slip B. Price List C. Pick List D. Purchase Order

33. A special journal that is used to record sales transactions and is periodically posted to the general ledger. A. General Journal B. Subsidiary Journal C. Sales Journal D. Accounts Receivable Journal

4. The business processes that are common in company-to-company sales business types include all of the following, except: A. Collect order data B. Record receivable and bill the customer C. Update affected records, such as accounts payable and cash D. Handle any product returns from the customer

4. The purpose of tracing sales invoices to shipping documents would be to provide evidence that: A. Shipments to customers were properly invoiced. B. No duplicate shipments or billings occurred. C. Goods billed to customers were shipped. D. All prenumbered sales invoices were accounted for.

41. The comparison of the shipping records with the sales journal and invoices is completed to minimize the related risk of: A. Invalid transactions B. Fictitious customers C. Omitted transactions D. Duplicate transactions

49. The business processes that are common in company-to-company sales business types include all of the following, except: A. Collect order data B. Record receivable and bill the customer C. Update affected records, such as accounts payable and cash D. Handle any product returns from the customer

50. Differences between a sales return and a sales allowance include: A. The issuance of a credit memorandum B. The existence of defective merchandise C. The documentation in a receiving report D. All of the above

52. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions may have been recorded in the wrong customer account. B. Transactions may be recorded in the wrong amount. C. Invalid transactions may have been omitted from the records. D. Transactions may not have been accumulated or transferred to the accounting records correctly.

55. The form, or source document, that conveys the details about a customer's order, prepared by the customer, is referred to as: A. Sales Order B. Sales Invoice C. Purchase Order D. Purchase Invoice

58. This item documents the quantities and descriptions of items ordered. Items from this document should be pulled from the warehouse shelves and packaged for the customer. A. Packing Slip B. Price List C. Pick List D. Purchase Order

59. Bank reconciliation tasks include: A. Procedures to ensure that deposits are examined for proper dates B. Procedures to ensure that all reconciling items are reviewed and explained C. Both of the above D. None of the above

62. A special journal that is used to record sales transactions and is periodically posted to the general ledger. A. General Journal B. Subsidiary Journal C. Sales Journal D. Accounts Receivable Journal

66. Which of the following is not one of the stated physical controls for inventory in a warehouse? A. Surveillance Cameras B. Alarm Systems C. Backup Copies D. Security Guards

7. The risks that may affect the revenue and cash collection processes include all of the following, except: A. Transactions may have been recorded in the wrong customer account. B. Transactions may be recorded in the wrong amount. C. Invalid transactions may have been omitted from the records. D. Transactions may not have been accumulated or transferred to the accounting records correctly.

7. The source document that initiates the recording of the return and the adjustment to the customer's credit status is the: A. Pick list B. Sales journal C. Credit memorandum D. Sales invoice

70. The comparison of the shipping records with the sales journal and invoices is completed to minimize the related risk of: A. Invalid transactions B. Fictitious customers C. Omitted transactions D. Duplicate transactions

74. A source document prepared by the personnel in the receiving dock that documents the quantity and condition of the items received is called a(n): A. Invoice B. Receiving log C. Receiving report D. Credit memorandum

78X. Because it can be expensive to develop and maintain a system that links two companies directly, the companies often use a third-party network. This third-party network provides other valuable services such as translation and encryption of the EDI data and authentication of a valid and authorized training partner. These third-party networks are called: A. EDI Mailboxes B. American National Standards Provider C. Value Added Networks D. Secured EDI Networks

79. Differences between a sales return and a sales allowance include: A. The issuance of a credit memorandum B. The existence of defective merchandise C. The documentation in a receiving report D. All of the above

8. Which of the following is a risk that may affect the revenue and cash collection process? A. Transactions may have been recorded by the wrong company B. Invalid transactions may have been omitted from the records C. Transactions may be recorded in the wrong amount D. Quantities of products returned are often difficult to determine

83. The Point-of-sales (POS) systems capture all relevant sales data at the point of sale - the cash register. The data that is captured includes all of the following, except: A. Prices are determined by accessing inventory and price list data B. Sales revenue is recorded C. Ordering for low-inventory items D. Inventory values are updated

88. Bank reconciliation tasks include: A. Procedures to ensure that deposits are examined for proper dates B. Procedures to ensure that all reconciling items are reviewed and explained C. Both of the above D. None of the above

9. Which of the following would represent proper segregation of duties? A. The employee who has custody of cash also does accounts receivable record keeping. B. The employee who has custody of cash completes the bank reconciliation. C. The employee who opens mail containing checks prepares a list of checks received. D. The employee who opens mail containing checks records transactions in the general ledger.

94. The security of having cash receipts deposited in the bank on a daily basis will help to minimize the related risk of: A. Invalid receipts B. Invalid bank account C. Lost or stolen cash D. Duplicate transactions

98. This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales documents electronically with a standard business format. A. E-commerce B. Virtual commerce C. Electronic data interchange D. Point of sale

A ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month. A) continuous B) open-invoice C) cycle billing D) balance forward

An IT system that uses touch screens, bar coded products, and credit card authorization during the sale is called a(n): A. Electronic data interchange system. B. E-commerce system. C. Point of sales system. D. E-payables system

An example of an independent verification in the sale process is: A. Preparation of packing lists on prenumbered forms. B. Initialing the sales order. C. Proof of recorded dates, quantities, and prices on an invoice. D. Physical controls in record storage areas.

Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is A) minimization of cash handling. B) lockbox arrangements. C) segregation of duties. D) frequent reconciliation of records

Capital or investment processes: A. Is a regular and frequent event. B. Only requires the specific approval of someone such as a senior accountant. C. Requires the specific approval of top management or board of directors. D. Can be considered revenue since it results in cash inflows.

Corrections to posting errors are made: A. Before the first trial balance. B. Only after the first trial balance. C. When discovered. D. Only when directed by top management.

Financial statements: A. Are generated from the values of the special journals and subsidiary ledgers. B. Are presented with complete chart of account detail. C. May contain condensed data from the general ledger. D. Show units in inventory and dollar value of those units.

In Petaluma, California, electric power is provided to consumers by the Power To The People Electrical Company, a local co-op. Each month PTTP mails bills to 70,000 households and then processes payments as they are received. The customers are provided with a remittance advice, which is a A) warning that failure to pay by the due date will result in a late charge. B) confirmation of the firm's privacy policy. C) turnaround document. D) bill.

In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance. A) specific identification B) open-invoice C) balance forward D) remittance advice

Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The manager of Callow Youth Clothing was entering an order when the following error message popped up: "Your total order exceeds your available credit. A Credit Department representative will contact you within 24 hours." This message is the result of a A) validity check. B) reasonableness test. C) limit check. D) sign check.

The form, or source document, that conveys the details about a customer's order, prepared by the customer, is referred to as: A. Sales Order B. Sales Invoice C. Purchase Order D. Purchase Invoice

The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He entered all the items and quantities, completed the checkout and payment process, but the following error message popped up when he tried to exit the site: "Please enter your email address." This message is likely the result of a A) customer relationship management software application. B) validity check. C) completeness test. D) closed-loop verification

The purpose of tracing sales invoices to shipping documents would be to provide evidence that: A. Shipments to customers were properly invoiced. B. No duplicate shipments or billings occurred. C. Goods billed to customers were shipped. D. All prenumbered sales invoices were accounted for.

This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales documents electronically with a standard business format. A. E-commerce application B. Application Integration Interface C. Electronic data interchange D. Point of sale

To ensure proper segregation of duties, only the ________ has authority to issue credit memos. A) accounts receivable supervisor B) controller C) credit manager D) cashier

What is the primary objective of the revenue cycle? A) to maximize revenue and minimize expense B) to reduce outstanding accounts receivable balances through increased cash sales C) to provide the right product in the right place at the right time at the right price D) to sell as much product as possible and/or to maximize service billings

When an ERP is used, it is assumed that there will be increases in efficiency and the effectiveness of the activities related to the revenue cycle. However, what must be in place and functioning well to fully realize these benefits? A) an effective marketing staff B) all the components of the expenditure cycle C) adequate controls D) adequate system flowchart documentation

Which of the following documents will be received by a customer after a sale? A. shipping log B. pick list C. monthly account statement D. purchase order

Which of the following is a detective control? a.) Hardening endpoints b.) Physical access controls c.) Penetration testing d.) Patch management

Which of the following is a risk that may affect the revenue and cash collection process? A. Transactions may have been recorded by the wrong company B. Invalid transactions may have been omitted from the records C. Transactions may be recorded in the wrong amount D. Quantities of products returned are often difficult to determine

Which of the following is not a basic activity of the revenue cycle? A) sales order entry B) shipping C) receiving D) billing

Which of the following is not one of the stated physical controls for inventory in a warehouse? A. Surveillance Cameras B. Alarm Systems C. Backup Copies D. Security Guards

Which of the following poses an internal control problem? A) Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this service. B) Products are released from inventory after a warehouse employee and a shipping clerk both sign the pick list. C) Sales representatives have authority to increase customers' credit limits in $1,000 increments. D) When customer payments are received in the mail, checks are sent to the cashier's office and remittance advices are sent to the accounts receivable department

Which of the following would be the least effective control to minimize the loss of inventory? A) Secure the storage location of inventory. B) Release inventory only with proper documentation. C) Periodically back up all perpetual inventory records. D) Reconcile the physical counts with and perpetual records

Which of the following would represent proper segregation of duties? A. The employee who has custody of cash also does accounts receivable record keeping. B. The employee who has custody of cash completes the bank reconciliation. C. The employee who opens mail containing checks prepares a list of checks received. D. The employee who opens mail containing checks records transactions in the general ledger.

This phase of the fixed asset processes relates to discarding fixed assets when they become old, outdated, inefficient, or damaged. A. Depreciation B. Acquisition C. Disposal D. Continuance

C. Disposal

An example of an independent verification in the sales process is: A. Preparation of packing lists on prenumbered forms B. Initialing the sales order C. Proof of recorded dates, quantities and prices on an invoice D. Physical controls in record storage areas

C. Proof of recorded dates, quantities and prices on an invoice

What internal control procedure(s) would provide protection against the following threats? A business experiences unauthorized disclosure of the buying habits of several well-known customers

CONFIDENTIALITY AGREEMENTS - not a guarantee, but puts legal pressure on you

software program that helps you deal with customers

CRM (customer relationship management)

Intentionally persuading a customer to buy more than they need to inflate revenues is called:

Channel stuffing

Which of the following is not a reason why a company may elect to employ cloud computing?

Cloud based ERP solutions provide clients greater security than an in-house ERP system

Which of the following is not one of the four feasibility aspects that should be considered in an IT system? a. completeness b. operational c. technical d. schedule

Completeness

Employee ethical considerations, related to IT governance would include which of the following?

Confidentiality for those who serve on the project teams

The IT environment plays a key role in how auditors conduct their work in all but which of the following areas:

Consideration of information fairness

This phase of the fixed asset processes related to those required to maintain accurate and up-to-date records regarding all fixed assets throughout their useful lives

Continuance

A document completed to prepare a record of the sales return and to adjust the amount of the customer's credit status is called a(n)

Credit memorandum

Process of dividing customer account master file into subsets and preparing invoices one subset at a time

Cycle billing

1. In a large company, there are hundreds, possibly thousands, of sales transactions each day. The company needs to have in place, systems and processes to: A. Capture the results of the sales transactions B. Record the proper and complete sales transactions C. Summarize and report the results of the transactions D. All of the above

102. Availability risks of e-commerce, or e-business, include all of the following, except: A. Hardware and software system failures B. Virus and worm attacks C. Denial-of-service attacks by hackers D. Incomplete audit trail

104. The standard format used with EDI allows all vendors and buyers to speak the same language. Which group has developed the standard format for the common documents used in the sales process? A. Electronic Data Systems B. American Common Forms Institute C. Association of Naturalized Documents D. American National Standards Institute

109. The process of user identification to ensure that only authorized users are accessing the IT system, which occurs through the use of user ID, password, and other unique identifiers, is called: A. Processing Integrity B. Virtualization C. Availability D. Authentication

11. If a company does not prepare an aging of accounts receivable, which of the following accounts is most likely to be misstated? A. Sales revenues B. Accounts receivable C. Sales returns and allowances D. Allowance for uncollectible accounts

12. Which of the following two terms both refer to the same document? A. Price list & sales order B. Packaging slip & bill of lading C. Shipping log & packing slip D. Sales order & purchase order

14. The use of electronic data interchange (EDI) to conduct sales electronically has both risks and benefits. Which of the following is a benefit of EDI, rather than a risk? A. Incomplete audit trail B. Repudiation of sales transactions C. Unauthorized access D. Shorter inventory cycle time

15. The maximum dollar amount that a customer is allowed to carry as an accounts receivable balance: A. Maximum Limit B. Credit Balance C. Maximum Balance D. Credit Limit

16. Which of the following is not a method of unethically inflating sales revenue? A. Channel stuffing B. Holding sales open C. Premature recognition of contingent sales D. Promotional price discounts

17. A ________ is prepared by warehouse personnel and lists all items included in a shipment. A. Bill of lading B. Packing slip C. Shipping log D. Pick list

22. This document is prepared on a regular basis to accumulated and summarize all the transactions that have taken place between the customer and the company within the period. A. Accounts Receivable Journal B. Sales Invoice C. Subsidiary Journal D. Customer Account Statements

27. In order to protect data files, production programs, and accounting records from unauthorized access, each of the following may be used, except: A. Passwords B. Physical controls (locked cabinets) C. Backup copies D. Surveillance cameras

34. This document is prepared on a regular basis to accumulated and summarize all the transactions that have taken place between the customer and the company within the period. A. Accounts Receivable Journal B. Sales Invoice C. Subsidiary Journal D. Customer Account Statements

38. In order to protect data files, production programs, and accounting records from unauthorized access, each of the following may be used, except: A. Passwords B. Physical controls (locked cabinets) C. Backup copies D. Surveillance cameras

42. The preparation of packing lists and shipping records on prenumbered forms will help to minimize the related risk of: A. Incorrect amounts B. Invalid sales C. Wrong customers D. Omitted transactions

46. In a large company, there are hundreds, possibly thousands, of sales transactions each day. The company needs to have in place, systems and processes to: A. Capture the results of the sales transactions B. Record the proper and complete sales transactions C. Summarize and report the results of the transactions D. All of the above

47. The authorization of sales returns requires that certain individuals within the company be assigned the authority for all of the following, except: A. Authorize Sales Returns B. Approve Credit Memos C. Develop Sales Return Policies D. Record the Credit Memos

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

52. The documentation accompanying payment that identifies the customer account number and invoice to which the payment applies is referred to as a(n): A. Cash Receipts Journal B. Promissory Note C. Deposit List D. Remittance Advice

53. Common means of presenting the revenue and cash collections processes pictorially include: A. Data Flow Diagram B. Document Flowchart C. Business Process Map D. All of the above

55. The recording responsibilities for cash receipts includes all of the following, except: A. Maintaining a cash receipts journal B. Updating accounts receivable records for individual customers C. Posting subsidiary ledger totals to the general ledger D. Preparing bank deposits

57. The maximum dollar amount that a customer is allowed to carry as an accounts receivable balance: A. Maximum Limit B. Credit Balance C. Maximum Balance D. Credit Limit

60. A chronological listing of shipments that allows management to track the status of sales and to answer customer inquiries regarding order status is called a(n): A. Invoice B. Bill of Lading C. Pick List D. Shipping Log

61. Whenever a company grants credit to customers, there is a danger that customers will not pay. In fact, most companies have occasional problems with customers who fail to pay which leads to writing off the accounts receivable. Proper controls related to these uncollectible accounts include all of the following, except: A. Segregation of responsibilities so that no one has the opportunity to write off an account to cover up stolen cash. B. Thorough guidelines are to be established for determining the amount of an allowance for uncollectible accounts. C. An accounts receivable aging report should be generated to analyze all customer balances and the lengths of time that have elapsed since the payments were due. D. Mathematical verification of the cash receipts journal and the accounts receivable ledger.

63. This document is prepared on a regular basis to accumulated and summarize all the transactions that have taken place between the customer and the company within the period. A. Accounts Receivable Journal B. Sales Invoice C. Subsidiary Journal D. Customer Account Statements

64. The preparation of deposit slips on prenumbered forms will help to minimize the related risk of: A. Invalid transactions B. Incorrect amounts C. Duplicate transactions D. Omitted transactions

67. In order to protect data files, production programs, and accounting records from unauthorized access, each of the following may be used, except: A. Passwords B. Physical controls (locked cabinets) C. Backup copies D. Surveillance cameras

71. The preparation of packing lists and shipping records on prenumbered forms will help to minimize the related risk of: A. Incorrect amounts B. Invalid sales C. Wrong customers D. Omitted transactions

75X. The standard format used with electronic data interchange (EDI) allows all vendors and buyers to speak the same language. This group has developed the standard format for the common documents used in the sales process: A. Electronic Data Systems B. American Common Forms Institute C. Association of Naturalized Documents D. American National Standards Institute

76. The authorization of sales returns requires that certain individuals within the company be assigned the authority for all of the following, except: A. Authorize Sales Returns B. Approve Credit Memos C. Develop Sales Return Policies D. Record the Credit Memos

8. Which of the following is not a document that is part of the cash collection process? A. Remittance advice B. Cash receipts journal C. Bank deposit slip D. Packing slip

81. The documentation accompanying payment that identifies the customer account number and invoice to which the payment applies is referred to as a(n): A. Cash Receipts Journal B. Promissory Note C. Deposit List D. Remittance Advice

84. The recording responsibilities for cash receipts includes all of the following, except: A. Maintaining a cash receipts journal B. Updating accounts receivable records for individual customers C. Posting subsidiary ledger totals to the general ledger D. Preparing bank deposits

86. The internal control of cash receipts related to adequate records and documents would include which of the following? A. Cash receipts listings prepared on a daily basis and reconciled to supporting documentation from the bank deposit. B. Bank deposit receipts should be retained and filed chronologically. C. Detailed customer accounts should also be maintained and reconciled with customer statements regularly. D. All of the above.

90. Whenever a company grants credit to customers, there is a danger that customers will not pay. In fact, most companies have occasional problems with customers who fail to pay which leads to writing off the accounts receivable. Proper controls related to these uncollectible accounts include all of the following, except: A. Segregation of responsibilities so that no one has the opportunity to write off an account to cover up stolen cash. B. Thorough guidelines are to be established for determining the amount of an allowance for uncollectible accounts. C. An accounts receivable aging report should be generated to analyze all customer balances and the lengths of time that have elapsed since the payments were due. D. Mathematical verification of the cash receipts journal and the accounts receivable ledger.

93. The preparation of deposit slips on prenumbered forms will help to minimize the related risk of: A. Invalid transactions B. Incorrect amounts C. Duplicate transactions D. Omitted transactions

99. This type of highly integrated IT system processes sales at a cash register in retail stores. A. E-commerce B. Virtual commerce C. Electronic data interchange D. Point of sale

A ________ is prepared by warehouse personnel and lists all items included in a shipment. A. Bill of lading B. Packing slip C. Shipping log D. Pick list

A chronological listing of shipments that allows management to track the status of sales and to answer customer inquiries regarding order status is called a(n): A. Invoice B. Bill of Lading C. Pick List D. Shipping Log

A customer service manager at Sad Clown Pajamas, Bob, received a call from the manager at Callow Youth Clothing, who informed Bob that Callow was entering bankruptcy liquidation and it was unlikely that they would be able to pay the outstanding balance on their account. Bob should A) document the phone conversation and forward it to the billing department manager. B) prepare a credit memo. C) approve a credit memo. D) document the phone conversation and forward it to the credit department manager

A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method. A) specific identification B) balance forward C) cycle billing D) open-invoice

A type of business document in which part of the original document is returned to the source for further processing is called a ________ document. A) feedback B) returnable C) closed-loop D) turnaround

During the sales order entry process, a ________ is performed to compare the quantity ordered with the standard amounts normally ordered. A) completeness test B) redundant data check C) field check D) reasonableness test

General ledger employees should record journal vouchers, but they should not A. Have recording responsibility for any special journals or subsidiary ledgers. B. Authorize journal vouchers. C. Have custody of assets. D. All of the above, A, B, and C, are correct.

In a large company, there are hundreds, possibly thousands, of sales transactions each day. The company needs to have in place, systems and processes to A. Capture the results of the sales transactions B. Record the proper and complete sales transactions C. Summarize and report the results of the transactions D. All of the above

In the revenue cycle, before a shipping notice is prepared, the shipping department personnel should match the inventory received from the warehouse to details from A) picking tickets. B) sales order and bill of lading. C) sales order. D) picking ticket and sales order

Matching customer account numbers and inventory item numbers to the numbers in the customer and inventory master files is an example of a A) completeness test. B) field check. C) reasonableness test. D) validity check.

Responding to customer inquiries and general customer service is an important aspect in the revenue cycle. Since customer service is so important, software programs have been created to help manage this function. These special software packages are called A) EDI systems. B) POS systems. C) VMI systems. D) CRM systems.

Sad Clown Pajamas is an Internet-based wholesaler. The manager of Callow Youth Clothing received an order from Sad Clown and found that the wrong product had been shipped. He repackaged the order and sent it back for a refund. When Sad Clown Pajamas received the returned product, they mailed a ______ to Callow Youth Clothing's manager. A) packing slip B) letter requesting an explanation C) remittance advice D) credit memo

The accounts receivable department must know when customers pay their invoices, yet segregation of duties controls dictate that the collection and recording functions be kept separate from each other. What is a solution to this potential internal control problem? A) Have customers send a remittance advice with their payment. B) Have mailroom personnel prepare a remittance list which can be forwarded to accounts receivable. C) Establish a lockbox arrangement with a bank. D) all of the above

The best solution for maintaining accurate automated perpetual inventory system is to use A) closed-loop verification when inventory is received from vendors and recorded. B) point of sale devices integrated with inventory records. C) periodic physical counts to reconcile with perpetual inventory records. D) RFID tags.

The decision to raise or acquire capital funds is: A. The responsibility of contract stock underwriters. B. The responsibility of contract bond underwriters. C. Affects only bonds. D. Is the responsibility of the board of directors.

The maximum dollar amount that a customer is allowed to carry as an accounts receivable balance: A. Maximum Limit B. Credit Balance C. Maximum Balance D. Credit Limit

The use of electronic data interchange (EDI) to conduct sales electronically has both risks and benefits. Which of the following is a benefit of EDI, rather than a risk? A. Incomplete audit trail B. Repudiation of sales transactions C. Unauthorized access D. Shorter inventory cycle time

To prevent the loss of valuable data in the revenue cycle, internal file labels can be used to A) keep competitors from accessing files. B) record off-site storage locations. C) organize the on-site physical storage site. D) reduce the possibility of erasing important files

What is the basic document created in the billing process? A) bill of lading B) sales order C) packing list D) sales invoice

Which of the following duties could be performed by the same individual and not violate segregation of duty controls? A) handling cash and posting to customer accounts B) issuing credit memos and maintaining customer accounts C) handling cash and authorizing credit memos D) handling cash receipts and mailing vendor payments

Which of the following statements is true? a.) "Emergency" changes need to be documented once the problem is resolved. b.) Changes should be tested in a system separate from the one used to process transactions c.) Change controls are necessary to maintain adequate segregation of duties. d.) All of the above are true.

Which of the following two terms both refer to the same document? A. Price list & sales order B. Packaging slip & bill of lading C. Shipping log & packing slip D. Sales order & purchase order

The purchase of fixed assets is likely to require different authorization processes than the purchase of inventory. Which of the following is not likely to be part of the authorization of fixed assets? A. Specific authorization. B. Inclusion in the capital budget. C. An investment analysis or feasibility analysis of the purchase. D. Approval of the depreciation schedule.

D. Approval of the depreciation schedule.

credit sale JE

DR. AR, CR. Sales

Example - sales = $100,000, we estimate 2% of our sales will go bad. What is the JE under the % of sales method?

DR. BDE $2,000, CR. ADA $2,000

Example - AR at the end of the year = 200,000, % of AR = 3%, ADA balance = $1,000 (CR.) What is JE under % of AR approach?

DR. BDE $5,000 CR. ADA $5,000

cash receipts (on credit) JE

DR. Cash, CR. AR

cash sale JE

DR. Cash, CR. Sales

updating AR -- DR. (document?) CR. (document?)

DR. Invoice CR. Remittance advice (cash collected)

sales returns & allowances JE

DR. sales returns & allowances CR. AR

Which of the following is a system conversion method in which on a chosen date the operation of the old system is terminated and all processing begins on the new system?

Direct cutover conversion

Picking Ticket

Document that authorizes removal of merchandise from inventory

Bill of Lading

Document used to establish responsibility for shipping goods via a third party

Back order

Document used to indicate stock outs exist

system that transfers info on documents electronically

EDI (electronic data interchange)

electronic transfer of funds

EFT

system that eliminates paper checks & uses electronic payments between banks

EFT (electronic funds transfer)

This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales documents electronically with a standard business format

Electronic data interchange

What internal control procedure(s) would provide protection against the following threats? Customers' credit card numbers are intercepted and stolen while being sent to the company's Web site

Encryption (scrambling the messages)

Examples of business continuity include all of the following except:

Environmental backup recovery plan

This type of system matching takes place without invoices. The receipt of goods is carefully evaluated and, if it matches the purchase order, settlement of the obligation occurs through the system

Evaluated Receipt Settlement

Which of the following IT systems is designed to avoid the document matching process and is an "invoiceless" system?

Evaluated receipt settlement

100. The individuals who are given the authority to establish sales prices, credit limits, and guidelines for accepting customers should be sure to keep most of the information confidential.

101. In order to meet the objectives of internal controls, individuals with authoritative responsibilities need to have access to the record keeping functions.

104. Independent checks and reconciliations should be preformed on a regular basis as part of the segregation of duties area of internal controls.

107. When a credit memorandum has a reference to the original sales invoice and approved price list it will assure that the correct customer receives credit for the return.

115. At a minimum, those who handle cash should be the ones to reconcile the bank statement.

119. Access to cash collections needs to limited to those who are expressly authorized to record the cash transactions.

123. The use of control totals and related acknowledgments can reduce the risk of denial of service attacks by hackers.

128. In many cases where revenue has been overstated by management, accountants have participated in the deception. Thankfully, once the overstatement has occurred, it will be offset by lower revenues in the subsequent year and normally will not recur.

88. Even though most companies collect order data from customers, the manner of receiving order data seldom varies.

92. When ever a sales order is received, it is necessary to check the inventory to make sure that the items ordered are in stock. If the items are in stock, a packing slip will be prepared.

95. When the customer is billed, the accounts receivable records should be updated to reflect the decreased balance.

97. Effective and efficient internal control often takes up valuable management time that could otherwise be spent on attention to revenue growth and cost controls.

TRUE OR FALSE: Two documents that usually accompany goods sent to the customer are a purchase order and a packing slip

FALSE - bill of lading

TRUE OR FALSE: Write-offs of accounts receivable should be authorized by the accounts receivable clerk

FALSE - controller

TRUE OR FALSE: Once a customer order has been approved, a purchase order would be produced next.

FALSE - once you approve an order - you have to begin to fill the order

TRUE OR FALSE: If a company uses the invoice method whereby customers typically pay according to each invoice, this is called the balance forward method

FALSE - open invoice

TRUE OR FALSE: The packing slip is the document within the revenue cycle that authorizes the warehouse to assemble goods needed to fill a customer's order

FALSE - picking ticket

TRUE OR FALSE: When an inventory item that is not in stock has been ordered by a customer, a back order is sent to the billing department.

FALSE - purchasing or production

TRUE OR FALSE: If the accounts receivable control account balance does not reconcile with the total of the account balances in the accounts receivable subsidiary ledger at the end of a month, this could be caused by the fact that a sales invoice amount was incorrectly computed.

FALSE - that would not cause that

TRUE OR FALSE: Ordinarily, the credit manager reports to controller.

FALSE - treasurer

TRUE OR FALSE: A receiving report file is likely to be involved in the processing related to the revenue cycle of a merchandising firm.

FALSE - usually in the expenditure cycle

TRUE OR FALSE: When customers return ordered merchandise, the merchandise should be delivered to the receiving department and purchasing should be notified

FALSE - you wouldn't notify purchasing

TRUE OR FALSE: A bill of lading is a document that is packed with the goods, giving a listing of the quantities of items included in the shipment.

FALSE- packing slip

system that integrates EFT and EDI information

FEDI (financial electronic data interchange)

seller's responsibility ends at the destination

FOB destination

seller's responsibility ends at the shipping point (buyer assumes all responsibility)

FOB shipping point

This type of check assesses the critical fields in a screen to make sure that a value is in those critical fields

Field check

The general guidelines, known as the generally accepted auditing standards, which include the concepts of adequate planning and supervision, internal control, and evidence relate to the

Fieldwork standards

The policies and procedures involved in purchasing property; capturing and maintaining relevant data about the assets; paying for and recording the related assets; depreciation and other expenses; and gains or losses are collectively referred to as:

Fixed asset processes

A detailed listing of the company's fixed assets, divided into categories consistent with the general ledger accounts is called:

Fixed asset subsidiary ledger

General controls are divided into five broad categories. Which of the following is not one of these categories?

Fraud prevention

An entity who receives a paycheck, but who does not actually work for the company is called:

Ghost employee

What internal control procedure(s) would provide protection against the following threats? Goods are shipped to a customer, but that customer is not billed.

Have to account for all SHIPPING NOTICES

To fulfill the management obligations that are an integral part of IT governance, management need not focus on:

Hiring an acceptable IT manager

For proper segregation of duties, the department that should authorize new employees for payroll would be

Human resources

12.6 If AOE decides to begin selling directly to individual customers, what changes will it need to make in its business processes?

If AOE begins selling to retail customers directly, it will need to make the following changes in almost every business process. Some of the necessary changes include:• Sales order entry - probably have to purchase a CRM system to effectively manage the mass of data about individual customers. Will probably also need to train its customer service representatives differently to handle customer inquiries. In addition, will need to decide whether to sell on credit. If yes, will need to develop guidelines for setting individual credit limits and to monitor balances. If no, then will need to decide how to accept payment: will it process customer credit card information directly or use a third-party service such as PayPal. If it processes the credit cards directly, AOE will need to ensure that it is PCI compliant. This likely will require designing the ERP system to segregate those portions that store/process credit card information. If it uses PayPal, AOE will incur fees.• Shipping - will become more complex as the volume of orders/shipments is likely to increase but average size decrease. AOE will need to decide how to most economically ship the merchandise. • Billing - if AOE does not sell on credit, little or no change is required. But if it decides to extend credit, will probably have to adopt some form of cycle billing.• Cash receipts - if it accepts customer payments via online banking, this will become more complex. AOE will probably want to obtain a UPIC for its retail customers to use when remitting payments. If AOE accepts physical checks, it will want to create an electronic lockbox arrangement with its bank.

Posting the sales amount to the wrong customer account because a customer account number was incorrectly keyed into the system.

If the transactions are being entered online, closed loop verification could be used. The system could respond to the operator entering the account number by retrieving and displaying the customer's name for the operator to review.If the transactions are being entered in batches, redundant data such as the first five characters of the customer's name could be included in each input record; after finding a match on customer account number, the system would also verify that the name characters match before posting the transaction. Note that a validity check would only tell you if a valid customer number was entered, not if the correct valid customer number was entered. Likewise, check digit verification could tell you if the customer number existed, but not if it was the right customer number.

Theft of funds by the cashier, who cashed several checks from customers.

In order to cover up this theft, the cashier has to be able to alter the accounts receivable records. Otherwise, a customer who is subsequently notified that they are past due will complain and provide proof that they sent in payment. Therefore, the critical control is to segregate the duties of handling cash and making deposits from the maintenance of accounts receivable records. One way to control cash receipts is shown below. The mailroom creates a cash prelist, sends a copy to a 3rd party, and sends the checks to the cashier. The cashier prepares duplicate deposit slips, sends the original to the bank with the checks, and sends a copy to the 3rd party. When the checks are deposited, the bank sends a copy of the validated deposit slip to the 3rd party, who compares all three documents to make sure all cash is deposited.

The internal control process that requires purchase return records be matched with the original purchase documentation and verified for item descriptions, quantities, dates and prices, will help to minimize the risk of:

Incorrect amounts

The internal control process that requires the approval of a cash disbursement transaction to take place prior to the preparation of the check, will help to minimize the risk of:

Invalid payments

Theft of goods by the shipping dock workers, who claim that the inventory shortages reflect errors in the inventory records.

Inventory clerks should count and document goods (on paper or by computer) as they leave inventory storage. Shipping personnel should be required to count and document receipt of goods from the finished goods storeroom to acknowledge responsibility for custody of the goods transferred.Counting goods when they are received and when they are sent to inventory storage as well as when goods leave inventory storage and are sent to shipping helps maintain control over inventory. Reconciling the two sets of counts makes it more difficult for employees to steal inventory as it is received and shipped.

This piece of audit evidence is ofter considered to be the most important because it is a signed acknowledgement of management's responsibility for the fair presentation of the financial statements and a declaration that they have provided complete and accurate information to the auditors during all phases of the audit

Letter of represenation

What internal control procedure(s) would provide protection against the following threats? An employee makes a credit sale to a customer who is already four months behind in making payments on his account.

Limit check

X may prepare a remittance list which has the names and amounts of all customer remittances; this list is sent to A/R for posting to customer accounts

Mailroom personnel

What internal control procedure(s) would provide protection against the following threats? A shipping clerk who is quitting to start a competing business copies the names of the company's 500 largest customers and offers them lower prices and better terms if they purchase the same product from the clerk's new company

Make everyone sign a not-to-compete agreement

Internal control activities within the payroll process, identified as authorization, would include which of the following?

Manager approval of payroll prior to signing checks

Invoiceless pricing has been adopted by some large businesses for B2B transactions. What are the barriers, if any, to its use in B2C commerce?

Many companies are trying to incent their customers to sign up for automatic bill-pay. The primary barrier is consumer resistance to or fear of online bill payment in general. However, there are also problems on the seller side - particularly in regards to billing disputes. A related issue is the threat of asset misappropriation - how easily can the seller attempt to recover items sold to the consumer?

Credit Limit

Maximum possible account balance for a customer

Credit Memo

Method of maintaining customer accounts that generates payments for each individual sales transaction

Open-invoice method

Method of maintaining customer accounts that generates payments for each individual sales transaction

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Purchase returns are presented to the sales department for preparation of a receiving report

N/A - receiving reports are NOT in the revenue cycle

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Receiving reports are prepared on preprinted, numbered forms

N/A - they are in the expenditure cycle

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Payments to vendors are made promptly upon receipt of goods or services

N/A - vendors are people you buy from, this is the revenue cycle we are discussing

What internal control procedure(s) would provide protection against the following threats? A business loses sales because of stockouts of several products for which the computer records indicated there was adequate quantity on hand.

Need a better inventory tracking system

Which of the following would not be an advantage of an investing in a POS system as part of new business venture:

No availability risk

Many companies use independent, internet-based service providers to handle their payroll processing. These payroll providers specialize in offering solutions and constant access to payroll information

Outsourcing of payroll services

What internal control procedure(s) would provide protection against the following threats? A waiter steals cash by destroying the customer sales ticket for customers who paid cash

POS SYSTEM, PRE-NUMBERED CHECKS/SYSTEM

Retail food service companies such as restaurants and fast food chains also use...

POS systems

a method of using hardware & software that captures sales transactions at the point of sale. these systems are integrated into the accounting system

POS systems

systems that reduce the time, cost, and errors inherent in the manual input of data.

POS systems

This individual is responsible for distributing the signed paychecks on the designated pay day

Paymaster

This document, prepared by the purchasing department, for use by the receiving department, is a copt of the purchase order that eliminates all data about the price and quantity of the items ordered

Payment received on account

This document authorizes the transfer of cash from the company's main operating account into the payroll cash account

Payroll voucher

Based on Section 201 of the Sarbanes-Oxley Act of 2002, which of the following non-audit services could be performed by an auditor of a publicly traded company?

Performing tax services for their audit client

12.4 Table 12-1 suggests that restricting physical access to inventory is one way to reduce the threat of theft. How can information technology help accomplish that objective?

Possibilities include:• Electronic locks on all entrances and exits to the inventory area.• Smart card technology where employees must scan their ID card prior to entering/exiting the inventory area. • Biometric access controls (fingerprint reader, face recognition software, etc.)• Attach RFID tags to inventory items and install RFID tag scanners at each exit of the inventory area.• Install and monitor surveillance cameras in the inventory area.

lockbox

Post office box to which customers send payments

A review of the feasibility assessments and other estimates made during the projects, the purpose of which is to help the organization learn from any mistakes that were made and help the company avoid those same errors in the future

Post-implementation review

In a system of proper internal controls, the same employee should not be allowed to:

Prepare voucher packages and sign checks

Personnel who work in the receiving area should complete all of the following process except:

Preparing an invoice

Sales orders are calculated based on current selling prices of the items sold. The source of these prices, which could include the entire set or pre-established and approved prices for each product, is referred to as a(n):

Price list

What internal control procedure(s) would provide protection against the following threats? A sales clerk sells a $7,000 wide-screen TV to a friend and alters the price to $700.

Prices need to be embedded so they cannot be altered

Cycle billing

Process of dividing customer account master file into subsets and preparing invoices for one subset at a time

Credit cards given to employees by the organization in order for the employees to make designated purchases are called:

Procurement cards

This concept means that the auditors should not automatically assume that their clients are honest, but that they must have questioning mind and a persistent approach to evaluating evidence for possible misstatements

Professional skepticism

An example of an independent verification in the sale process is:

Proof of recorded dates, quantities and prices on an invoice

Within the purchases processes, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing processes?

Purchase requisition

Internal control is strengthened by the use of a blind purchase order, upon which the quantity of goods ordered is intentionally left blank. This blind copy is used in which department?

Receiving department

When customers return goods, the goods are handles by:

Receiving department

Turnaround documents returned by customers with payments.

Remittance advice

Circumstances within a company, related to sales returns, that indicate a high level of risk include all of the following except:

Returns are received at one location with credit memos issued at the same location

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Checks paid in excess of $5,000 requires the signature of 2 authorized members of management

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Customer returns must be approved by a designated manager before a credit memo is prepared

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. The billing department verifies the amount of customer sales invoices by referring to the authorized price list

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Account statements are sent to customers on a monthly basis

S - By sending out a monthly statement - if there is something wrong - they'll tell you

What internal control procedure(s) would provide protection against the following threats? The mailroom clerk steals checks and then endorses them for deposit into the clerk's personal bank account.

SET UP A LOCKBOX SYSTEM - money never comes to your company; if you have to have the money come to your company - INSTALL CAMERA; HAVE MORE THAN 1 PERSON CHECK THE MAIL

Because it is not possible to test all transactions and balances, auditors rely on this to choose and test a limited number of items and transactions and then make conclusions about the balance as a whole

Sampling

Which section of the Sarbanes-Oxley Act of 2002 provides protection for employees of publicly traded companies who provide evidence of fraud?

Section 806

One of the most critical controls to prevent theft of inventory purchased is to

Segregate inventory custody from inventory record keeping

Billing customers for the quantity ordered when the quantity shipped was actually less due to back ordering of some items.

Shipping personnel should be required to record the actual quantity shipped on the order document and/or enter the quantity shipped into the accounting system, in order that bills can be prepared based upon the quantity shipped rather than the quantity ordered. The system should be configured to generate invoices automatically based on the quantity shipped.

The use of electronic data interchange (EDI) to conduct sales electronically has both risks and benefits. Which is a benefit of EDI rather than a risk?

Shorter inventory cycle time

The main difference between substantive testing and controls testing is

Substantive testing verifies whether information is correct, whereas control tests determine whether the information is managed under a system that promotes correctness

CRM system

System that contains customer-related data organized in a manner to facilitate customer service, sales, and retention

FEDI

System that integrates EFT and EDI information

102. Record files related to sales can be organized by customer name or by the numerical sequence of the documents.

110. It is necessary for a company to consider the risks of its system to determine whether the costs of implementing a control procedure are worthwhile in terms of the benefits realized from the control.

113X. The remittance advice sent by the customer with the related payment is used by the vendor to properly apply the payment to the customer's account.

94. If a vendors waits too long to send the bill to the customer due to the fact that it could cause a delay of the collection of the cash.

96. The existence of good internal controls do not ensure high sales and profits.

TRUE OR FALSE: A cycle billing system spreads out the monthly statements to customers over the entire month with the idea being that the processing load and cash flow will be more even

TRUE

TRUE OR FALSE: A system where the bank electronically notifies a company about customers' remittances received through the postal system is known as EDI.

TRUE

TRUE OR FALSE: A bill of lading is a legal contract that defines responsibility for goods that are in transit

TRUE

TRUE OR FALSE: A credit memo should be prepared as a part of the return of goods sold to a customer.

TRUE

TRUE OR FALSE: A lockbox is a physical security measure for cash received daily from customers.

TRUE

TRUE OR FALSE: A remittance advice is an example of a turnaround document

TRUE

TRUE OR FALSE: A shipping notice is useful to ensure that the proper quantities are reflected on sales invoices.

TRUE

TRUE OR FALSE: A typical means of receiving cash payments from customers is via a lock box

TRUE

TRUE OR FALSE: In the revenue cycle, it would be acceptable for the cashier to prepare the deposit slip.

TRUE

TRUE OR FALSE: Invoices and remittance advices are the two source documents that are used to support posting to the accounts receivable subsidiary records

TRUE

TRUE OR FALSE: Processing of accounts receivable is simplified by use of the balance forward method

TRUE

TRUE OR FALSE: The bill of lading is the source document within the revenue cycle that authorizes a common carrier to transport goods to customers.

TRUE

TRUE OR FALSE: The invoice would usually be prepared after receiving a shipping notice

TRUE

TRUE or FALSE - Customers in good standing who are below their credit limits are approved under a general authorization procedure (example - everyone below $3,000 will be approved)

TRUE

TRUE OR FALSE: A purchase requisition is not likely to be involved in the processing of sales transactions

TRUE - it is in the expenditure cycle

• Respond to customer inquiries. • CRM What step in the sales order entry process?

Taking the customer's order

Internal controls related to the purchase returns would include all of the following except:

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

Writing off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer.

The problem usually occurs because the same individual writes off accounts and processes cash payments. Therefore, the best control procedure to prevent this problem is to separate the function of authorizing write-offs of uncollectible accounts from the function of handling collections on account.

The internal control activity related to the adequate records and documents, related to sales, includes which of the following?

Those responsible for recording sales should ensure that the supporting documentation is retained and organized

The matching of a purchase order to the related receiving report and invoice is known as:

Three-way matching

It is necessary for employees to maintain adequate records of the hours worked and the projects worked on. The record of hours worked by an employee for a specific payroll period is reported on a document called:

Time sheet

Immediately upon receiving checks from customers in the mail, a responsible employee working in an environment of adequate internal controls should prepare a listing of receipts and forward it to the company's cashier. A copy of this cash receipts listing should also be sent to the company's:

Treasurer for comparison with monthly bank statement

Remittance advice

Turnaround document returned by customers with payments

Which of the following controls is not normally performed in the accounts payable department?

Unused purchase orders and receiving reports are accounted for

Making a credit sale to a customer who is already four months behind in making payments on his account.

Up-to-date credit records must be maintained to control this problem. During the credit approval process, the credit manager should review the accounts receivable aging schedule to identify customers with past-due balances to prevent additional sales to those customers. Alternatively, the computer system could be programmed to determine if the customer had any past due Accounting Information Systems 12-5©2018 Pearson Education, Inc.balances over a specified length of time (such as 60 days). If not, the sale would be approved. If they had a past-due balance, a notice could be sent to the credit manager who could review the sale and make a decision about extending additional credit.A credit limit check would not be sufficient, because a customer could have a balance below the credit limit but be past due. A computer system could be programmed to check both credit limit and past due accounts and authorize sales. Sales not passing either the credit limit or the past due test would be sent to the credit manager for a decision.

The business processes that are common in company-to-company sales transactions include all of the following except: a. collect order data b. record receivable and bill the customer c. update affected records, such as account payable and cash d. handle any product returns from the customer

Update affected records, such as account payable and cash

the sales order department typically reports to the...

VP of marketing

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Collections received by check are received by the company receptionist who has no additional record-keeping responsibilities

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Collections received by check are immediately forwarded unopened to the accounting department.

W - Accounting should not have their hands on checks as it is a recording function.

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. A bank rec is prepared on a monthly basis by the treasurer's department

W - Ideally should be done by internal auditors as they are not tied to any particular department

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. A cash receipts journal is prepared by the treasurer's department

W - Treasurer handles actual cash

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Cash collections are deposited in the bank account on a weekly basis

W - should deposit on a daily basis

Indicate whether each of these items represents a strength (S) or weakness (W) related to internal controls in the revenues and cash collection processes. Indicate N/A if it either has no impact on the strength of internal controls or does not pertain to the revenues and cash collection processes. Entries in the shipping log are reconciled with the sales journal on a monthly basis

W - should do more frequently (like weekly)

What internal control procedure(s) would provide protection against the following threats? An employee writes off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer.

WRITE-OFF SHOULD BE APPROVED BY SOMEONE IN AUTHORITY; CASH SHOULD BE HANDLED BY SOMEONE IN THE CONTROLLER'S DEPARTMENT.

Why can fixed assets be used for earnings management?

We can spread out our depreciation expense longer by increasing the useful life AND reduce depreciation expense by having a higher salvage value

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

The sales and cash collections process begins where

a customer places an order with the company

When a company sells items over the Internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be a(n): a. Availability risk b. Processing integrity risk c. Security risk d. Confidentiality risk

a. Availability risk

A special journal used to record all cash collections is called a(n): a. Cash Receipts Journal b. Remittance Advice c. Check Register Journal d. Customer Subsidiary Journal

a. Cash Receipts Journal

Examples of characteristics that indicate a company may be more risky with respect to the revenue process include of all the following, except: a. Changes in sales price or customers are infrequent b. The pricing structure is complex or is based estimates c. There is a large volume of transactions is carried out d. The company dependents on a single or on very few customers

a. Changes in sales price or customers are infrequent

This type of highly integrated IT system incorporates electronic processing of sales-related activities and, generally, the sales processes are transacted over the internet. a. E-commerce b. Virtual commerce c. Electronic data interchange d. Point of sale

a. E-commerce

A control that limits the risk of network break-ins is the coding of data that makes data unreadable to those without the appropriate key. This process does not stop the breaches, but will make the data useless. a. Encryption b. Encoding c. Repudiation d. Hacking

a. Encryption

This section of the commons forms used as the standard format in EDI data transmission contains data about the file or transmission and identify the end of a particular transaction. a. Header and Trailer Data b. Labeling interchanges c. Data Segments d. Footer Data

a. Header and Trailer Data

The separation of the custody of cash from the accounts receivable record keeping will help to minimize the related risk of: a. Invalid cash receipts b. Incorrect amounts c. Invalid transactions d. Duplicate transactions

a. Invalid cash receipts

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): a. Price list b. Purchase order c. Packing slip d. Pick list

a. Price list

Under a system of sound internal controls, if a company sold defective good, the return of those goods from the customer should be accepted by the: a. Receiving Clerk b. Sales Clerk c. Purchasing Clerk d. Inventory Control Clerk

a. Receiving Clerk

A document prepared that lists the chronological sequence of all returned items is referred to as a(n): a. Receiving log b. Receiving report c. Invoice d. Packing list

a. Receiving log

Circumstances within a company, related to sales returns, that indicates a high level of risk include all of the following, except: a. Returns are received at one location with credit memos issued at the same location b. Quantities of products returned are often difficult to determine c. There is a high volume of credit memo activity d. Returns are received by consignees or under other arrangements not directly controlled by the company.

a. Returns are received at one location with credit memos issued at the same location

This document is prepared and sent to the customer once the shipment has occurred. The document provides the details of the sale and requests payment. a. Sales Invoices b. Accounts Receivable Statement c. Bill of Lading d. Sales Order

a. Sales Invoice

Important characteristics of electronic data interchange (EDI) include all of the following, except: a. Sales register is used to record all transactions b. Inter-company refers to two or more companies conducting business electronically c. Computer-to-computer aspect indicates that each company's computers are connected via a network d. A standard business format is necessary so that companies can interact and trade with a variety of buyers and sellers

a. Sales register is used to record all transactions

The purpose of tracing shipping documents to prenumbered sales invoices would be to provide evidence that: a. Shipments to customers were properly invoiced b. No duplicate shipments or billings occurred c. Goods billed to customers were shipped d. All prenumbered sales invoices were accounted for

a. Shipments to customers were properly invoiced

In the revenue cycle, a customer places an order for a certain product. Before the order is checked for inventory availability, what step should be taken? a. The customer's credit should be checked for a sale on account. b. The sales order should be created and written to a file. c. Shipping should be notified of an order in process. d. A picking list should be generated for the warehouse.

a. The customer's credit should be checked for a sale on account.

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

a. The date of delivery

The internal control activity related to the adequate records and documents, related to sales, includes which of the following? a. Those responsible for recording sales should ensure that the supporting documentation is retained and organized b. Information systems duties included in the revenue process includes the preparation of sales orders and shipping logs c. All records are to be prepared by someone other than the person who has custody of the assets. d. The authorization process is to remain separate from the recording process

a. Those responsible for recording sales should ensure that the supporting documentation is retained and organized

When a sale occurs, the information resulting from that sale must flow into the sales recording systems, the accounts receivable and cash collection systems, and the inventory tracking systems. In IT accounting systems, these recording and processing systems are referred to as: a. Transaction Processing Systems b. Revenue and Cash Processing Systems c. Point of Sale System d. E-business System

a. Transaction Processing Systems

The risks that may affect the revenue and cash collection processes include all of the following, except: a. Transactions recorded by the wrong company b. Valid transactions may have been omitted from the records c. Transactions may not have been recorded in a timely manner d. Recorded transactions may not be valid or complete

a. Transactions recorded by the wrong company

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

a. Treasurer for comparison with the monthly bank statement

The custody responsibilities for cash responsibilities for cash receipts includes all of the following, except: a. Updating accounts receivable records b. Opening mail c. Preparing a list of collections d. Handling receipts of currency and checks

a. Updating accounts receivable records

Customer inquiries during the sales order process are best handled by a. a sales order and customer service person. b. accounting personnel. c. the credit manager. d. A and C above

a. a sales order and customer service person.

When a company sells items over the internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be an a. availability risk b. processing integrity risk c. security risk d. confidentiality risk

a. availability risk

When a proper segregation of duties exists in the area of handling cash receipts, the __________, who reports to the __________, actually handles the cash and is not the same person who posts cash receipts to customer accounts. a. cashier; treasurer b. cashier; controller c. accountant; treasurer d. accountant; controller

a. cashier; treasurer

Examples of characteristics that indicate a company may be more risky with respect tot the revenue process include all of the following except: a. changes in sales prices or customers are infrequent b. the pricing structure is complex or is based on estimates c. there is a large volume of transactions carried out d. the company depends on a single or on very few customers

a. changes in sales prices or customers are infrequent

During the sales order entry process, a __________ is performed to verify that each transaction record contains all appropriate data items. a. completeness test b. redundant data check c. field check d. reasonableness test

a. completeness test

Which of the following type of audit would include an audit performed by the IRS? a. compliance b. operational c. information d. financial statement

a. compliance

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

a. credit manager

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

a. open-invoice method

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

a. payroll register

In the shipping area of the company, the __________ is used to obtain the goods from the warehouse facility and prepare them for shipment to the customer. a. picking ticket b. packing slip c. bill of lading d. invoice

a. picking ticket

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

a. picking ticket

Copies of the sales order could be used for all of the following except a. Purchase order b. Credit authorization c. Shipping notice d. Packing slip

a. purchase order

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

a. receiving clerk.

A customer returns a document along with cash payment. The document identifies the source and the amount of the cash payment. It is called a a. remittance advice. b. remittance list. c. credit memorandum. d. debit memorandum.

a. remittance advice

What is the primary objective of the revenue cycle? a. to provide the right product in the right place at the right time at the right price b. to sell as much product as possible and/or to maximize service billings c. to maximize revenue and minimize expense d. to reduce outstanding accounts receivable balances through increased cash sales

a. to provide the right product in the right place at the right time at the right price

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

a. treasurer for comparison with the monthly bank statement

generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts

accounts payable department

the accounting record that includes the details of amounts owed to each vendor

accounts payable subsidiary ledger

The goal of corporate governance, with respect to internal controls and compliance, is to ensure that financial information is

accurate, transparent, and complete

• Estimate bad debts based on how old they are • Older the debt—harder it will be to collect it • Build a table with different %s - end # determined will be taken into account when making ADJ entry

aging approach (allowance method)

related document to: aging approach (allowance method)

aging schedule

the process of user identification to ensure that only authorized users are accessing the IT system, which occurs through the use of user ID, password, etc

authentication

When a company sells items over the internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be an

availability risk

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

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

b) the purchased goods have been used

The sales and cash collections process begins when: a. Merchandise is shipped to a customers b. A customer places an order with the company c. Merchandise is purchased d. A vendor places an order with the company

b. A customer places an order with the company

General controls of the IT system would include all of the following, except: a. Authentication of users b. Accuracy c. Physical access controls d. Business continuity planning

b. Accuracy

The risks of e-commerce, or e-business, include all of the following, except: a. Confidentiality b. Accuracy c. Security d. Processing Integrity

b. Accuracy

Application controls of the IT system would include: a. Availability b. Accuracy and Completeness c. Security d. Processing Integrity

b. Accuracy and Completeness

The segregation of duties related to sales returns would ideally separate the function of performing the credit memo activity and all of the following, except: a. Credit approval b. Approve the credit memos c. Billing d. Data entry

b. Approve the credit memos

The terms of agreement between the company and the common carrier are documented in a(n): a. Pick List b. Bill of Lading c. Invoice d. Packing Slip

b. Bill of Lading

Independent checks and reconciliations, related to cash receipts, include all of the following, except: a. Cash counts should occur on a surprise basis and be conducted by someone not responsible for cash receipts functions. b. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft c. Physical count of cash needs to be conducted from time to time in order to compare actual cash on hand with the amounts in the accounting records d. Daily bank deposits should be compared with the detail on the related remittance advice and in the cash receipts journal.

b. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft

Independent checks and reconciliations, related to cash receipts, include all of the following, except: a. Cash counts occur on a surprise basis and be conducted by someone not responsible for cash receipts functions b. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft c. Physical count of cash needs to be conducted from time to time in order to compare actual cash on hand with the amounts in the accounting records. d. Daily bank deposits should be compared with the detail on the related remittance advice and in the cash receipts journal.

b. Cash collections should be deposited in the bank in a timely manner to prevent the risk of theft

The following circumstances may indicate risk related to cash collections, except: a. High volume of cash collections b. Centralized cash collections c. Lack of consistency in the volume or source of collections d. Presence of cash collections denominated in foreign currencies

b. Centralized cash collections

A document completed to prepare a record of the sales return and to adjust the amount of the customer's credit status is called a(n): a. Receiving log b. Credit memorandum c. Sales invoice d. Sales journal

b. Credit memorandum

When customers send their remittances electronically to the company's bank, this is called a. FEDI. b. EFT. c. to using procurement cards. d. an electronic lockbox

b. EFT

The separation of the responsibility for the authorization of new customers from the custody of inventory will help to minimize the related risk of: a. Invalid sales b. Fictitious customers c. Incorrect amounts d. Timing issues

b. Fictitious customers

The separation of the responsibility for custody of cash from the responsibility for reconciling the bank accounts will help to minimize the related risk of: a. Wrong customers b. Incorrect amounts c. Invalid bank account d. Invalid transactions

b. Incorrect amounts

The separation of the custody of inventory from the accounts receivable record keeping will help to minimize the related risk of: a. Incorrect amounts b. Invalid returns c. Fictitious customers d. Timing issues

b. Invalid returns

The standard format for common forms used in the United States for electronic data interchange (EDI) data transmission is divided into three parts. Which of the following is one of those "parts"? a. Availability Systems b. Labeling interchanges c. Security Trailer d. Processing Data

b. Labeling interchanges

This term refers to moving the current accounting period's cut-off date forward to include sales that correctly occur in a future period. This activity occurs so that the selling company can inflate their sales in the current period. a. Channel stuffing b. Leaving sales open c. Shipping reversal d. Sales deferral

b. Leaving sales open

Which of the following relationships does not violate the rules of segregation of duties? a. Credit authorization and preparation of the sales order b. Preparation of the sales order and sales invoice c. Preparing goods for shipment and accounting for inventory d. Entering sales in the sales journal and handling the inventory

b. Preparation of the sales order and sales invoice

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

b. Preparing the bank reconciliation

The recording responsibilities for cash receipts includes all of the following, except: a. Opening and closing all bank accounts b. Preparing the bank reconciliation c. Approving bank deposits d. Approving electronic transfers of funds

b. Preparing the bank reconciliation

the policies and procedures that employees follow when completing the sale, capturing customer data and sales quantities, and routing the resulting sales documents to the right departments within the company are referred to as: a. Transactions b. Processes c. Posting d. Systems

b. Processes

When a company sells items over the Internet, it is usually called e-commerce: There are many IT risks related to Internet sales. The risk of invalid data entered by a customer would be a(n): a. Availability risk b. Processing integrity risk c. Security risk d. Confidentiality risk

b. Processing integrity risk

The business processes that are common in company-to-company sales business are divided into three groups. Which of the following is not one of those groups? a. Sales processes, including ordering, delivery, and billing b. Purchase of inventory, including ordering, delivery, and billing c. Sales Returns processes d. Cash Collection processes

b. Purchase of inventory, including ordering, delivery, and billing

When a sales transaction has been authorized, by the signature of the designated employee, it means that the designated employee has done all of the following, except: a. Verified the sale is to an accepted customer b. The vendor's credit has been approved c. The price is correct d. Approval documented by a signature of initials of the designated employee

b. The vendor's credit has been approved

EDI systems have many advantages within the revenue and cash collection processes. Which of the following is not one of those benefits? a. Reduction or elimination of data keying b. Trading partners gaining access to data c. Elimination of postage costs d. Competitive advantage through better customer service

b. Trading partners gaining access to data

This occurs when the IT system automatically makes a list of users and the actions they take within the IT system. a. Control Totals b. Transaction Logging c. Encryption Keys d. Acknowledgement

b. Transaction Logging

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

b. Verification of the bank statement and the cash account in the general journal

In order to master risks and controls and how they match together, which of the following is NOT one of the areas to fully understand? a. the description of the general and application controls tht should exist in an IT system b. accounting information system c. type and nature of risks in an IT system d. recondnition of how controls can be used to reduce risk

b. accounting information system

In a cash collection system with proper controls, the __________ function, responsible to the __________, is separate and distinct from the cash handling activities. a. accounts receivable; treasurer b. accounts receivable; controller c. cashier; controller d. cashier; treasurer

b. accounts receivable; controller

In a shipping department, a __________ is a legal contract that defines responsibility for goods that are in transit. a. packing slip b. bill of lading c. picking list d. back order

b. bill of lading

Types of fraud that may occur in the payroll function includes all of the following except: a. overstated hours b. incorrectly computed tax withholdings c. false claims of sick leave d. pay claims made by ghost employees

b. incorrectly computed tax withholdings

Which of the following provides a means both to improve the efficiency of processing customer payments and also to enhance control over those payments? a. CRM b. lockboxes c. aging accounts receivable d. EDI

b. lockboxes

A company uses an invoice method whereby customers typically pay according to each invoice. This is the __________ method. a. monthly statement b. open-invoice c. balance forward d. cycle billing

b. open-invoice

Once a customer order has been approved, which document is produced next? a. the sales invoice b. the packing slip c. the remittance advice d. the purchase order

b. packing slip

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

b. packing slip

When a company sells items over the internet, it is usually called e-commerce. There are many IT risks related to internet sales. The rose of invalid data entered by a customer would be an a. availability risk b. processing integrity risk c. security risk d. confidentiality risk

b. processing integrity

How is credit approval generally handled for well-established customers with a documented payment history? a. specific authorization by the credit manager b. routine approval is usually granted c. a new credit application is taken d. a formal credit check is made for each sale

b. routine approval is usually granted

Auditors design audit tests to analyze information in order to determine whether management assertions are valid. Which of the following is not a management assertion? a. cutoff b. understandability c. rights and obligations d. classification and presentation

b. understandability

why is the bill of lading very important?

b/c it tells you a lot of things -- who is going to pay the cost of the shipping, who is responsible if there is a loss, etc.

why do we have bad debts?

b/c we sell on credits

Document used to indicate stockouts exist

back order

If inventory quantity is not sufficient, what is created?

back order for the items

Method of maintaining accounts receivable that generates one payment for all sales made the previous month

balance-forward method

USING X, As the customer checks out, the item is scanned and prices are determined by accessing inventory and price list data, sales revenue is recorded, and inventory values are updated.

bar code labels - using the universal product code (UPC)

features that assist management and accountants, as the result of the POS systems, include

bar code scanning eliminates the need to manually enter product codes, quantities, or prices real-time update of cash, sales, and inventory records allows for immediate analysis of sales trends, inventory needs, and cash on hand credit card authorization during the sale save time and help prevent credit card fraud

Contract between the company that made the sale & the carrier (i.e. trucking/rail company or airline)

bill of lading

the terms of agreement between the company and the common carrier are documented in a

bill of lading

this document is prepared by the purchasing department, for use by the receiving department, and is a copy of the purchase order that eliminates all data about the price and quantity of the items ordered

blind purchase order

For good internal control in an ERP system, sales staff should be permitted to:a. Adjust customer credit limitsb. Issue credit memosc. Both of the aboved. Neither of the above

Which of the following is not one of the stated physical controls for inventory in a warehouse? a. Surveillance Cameras b. Alarm Systems c. Backup Copies d. Security Guards

c. Backup Copies

Bank reconciliation tasks include: a. Procedures to ensure that deposits are examined for proper dates b. Procedures to ensure that all reconciling items are reviewed and explained c. Both of the above d. None of the above

c. Both of the above

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

c. Credit memorandum

The revenue cycle is a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales. With whom is the primary external exchange of information? a. Competitors b. Creditors c. Customers d. marketing organizations

c. Customers

This type of highly integrated IT system, inter-company, computer-computer, communicates sales documents electronically with a standard business format. a. E-commerce b. Virtual commerce c. Electronic data interchange d. Point of sale

c. Electronic data interchange

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

c. FEDI

The purpose of tracing sales invoices to shipping documents would be to provide evidence that: a. Shipments to customers were properly incurred b. No duplicate shipments or billings occurred c. Goods billed to customers were shipped d. All prenumbered sales invoices were accounted for

c. Goods billed to customers were shipped

The risks that may affect the revenue and cash collection processes include all of the following, except: a. Transactions may have been recorded in the wrong customer account. b. Transactions may be recorded in the wrong amount. c. Invalid transactions may have been omitted from the records d. Transactions may not have been accumulated or transferred to the accounting records correctly

c. Invalid transactions may have been omitted from the records

1. 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 receivableb. Writing checks plus reconciling the bank statementc. Handling cash receipts plus issuing credit memosd. All of the combinations involve custody and authorization in a manner that would enable an employee to conceal theft of a customer's paymente. 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

c. Issuing credit memos is an authorization activity; handling cash receipts is custody. The employee could issue a credit memo to authorize writing down the customer's account for the amount of the payment that was stolen. Answer a is wrong because it involves a combination of custody (handling cash receipts) and recording (maintaining accounts receivable). Answer b is wrong because writing checks would further reduce the amount of cash and reconciling the bank statement would not adjust the customer's account for the stolen payment; consequently, the customer would then complain when informed that he/she had not paid their account.

Features that assist management and accountants, as the result of the point-of-sale systems, include all of the following, except: a. Bar code scanning eliminates the need to manually enter product codes, quantities, or prices. b. Real-time update of cash, sales, and inventory records allows for immediate analysis of sales trends, inventory needs, and cash on hand. c. List prices can be changed by the check-out clerks to take advantage of any price changes. d. Credit card authorization during the sale save time and help prevent credit card fraud

c. List prices can be changed by the check-out clerks to take advantage of any price changes

The security of having cash receipts deposited in the bank on a daily basis will help to minimize the related risk of: a. Invalid receipts b. Invalid bank account c. Lost or stolen cash d. Duplicate transactions

c. Lost of stolen cash

The comparison of the shipping records with the sales journal and invoices is completed to minimize the related risk of: a. Invalid transactions b. Fictitious customers c. Omitted transactions d. Duplicate transactions

c. Omitted transactions

The Point-of-sales (POS) systems capture all relevant sales data at the point of sale- the cash register. The data that is captured includes all of the following, except: a. Prices are determined by accessing inventory and price list data b. Sales revenue is recorded c. Ordering for low-inventory items d. Inventory values are updated

c. Ordering for low-inventory items

This item documents the quantities and descriptions of items ordered. Items from this document should be pulled from the warehouse shelves and packaged for the customer. A. Packing Slip b. Price List c. Pick List d. Purchase Order

c. Pick List

An IT system that uses touch-screen cash registers as an input method is called a. Electronic data interchange b. E-business c. Point of sale system d. Source documents and keying

c. Point of sale system

An IT system that uses touch screens, bar coded products, and credit card authorization during the sale is called a(n): a. Electronic data interchange system b. E-commerce system c. Point of sales system d. E-payables system

c. Point of sales system

An example of an independent verification in the sale process is: a. Preparation of packing lists on prenumbered forms. b. Initiating the sales order c. Proof of recorded dates, quantities, and prices on an invoice d. Physical controls in record storage areas

c. Proof recorded dates, quantities, and prices on an invoice

The form, or source document, that conveys the details about a customer's order, prepared by the customer, is referred to as: a. Sales Order b. Sales Invoice c. Purchase Order d. Purchase Invoice

c. Purchase Order

A source document prepared by the personnel in the receiving dock that documents the quantity and condition of the items received is called a(n): a. Invoice b. Receiving log c. Receiving report d. Credit memorandum

c. Receiving report

The advantages of e-commerce, or e-business, include all of the following, except: a. Reduced cost through lower marketing, employee, and paperwork costs b. Shorter sales cycles c. Repudiation of sales transactions d. Increased accuracy and reliability of sales data

c. Repudiation of sales transactions

A special journal that is used to record sales transactions and is periodically posted to the general ledger. a. General Journal b. Subsidiary Journal c. Sales Journal d. Accounts Receivable Journal

c. Sales Journal

Differences between a sales return and sales allowance include: a. The issuance of a credit memorandum b. The existence of defective merchandise c. The documentation in a receiving report d. All of the above

c. The documentation in a receiving report

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

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

The business processes that are common in company-to-company sales business types include all of the following except: a. Collect order data b. Record receivable and bill the customer c. Update affected records, such as accounts payable and cash d. Handle any product returns from the customer

c. Updated affected records, such as accounts payable and cash

Because it can be expensive to develop and maintain a system that links two companies directly, the companies often use a third-party network. This third-party network provides other valuable services such as translation and encryption of the EDI data and authentication of a valid and authorized training partner. These third-party networks are called: a. EDI Mailboxes b. American National Standards Provider c. Value Added Networks d. Secured EDI Networks

c. Value Added Networks

Two documents usually accompany goods sent from the vendor to the customer. What are these two documents? a. a bill of lading and an invoice b. a packing slip and a bill of lading c. an invoice and a packing slip d. an invoice and a sales order

c. an invoice and a packing slip

With a(n) __________ system, customers pay according to the amount showing on their monthly statement and payments are simply applied against the total account balance. a. closed invoice b. open invoice c. balance forward d. invoice forward

c. balance forward

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

c. 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

c. 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

c. checking customer credit

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

c. credit memorandum

A __________ system spreads out the monthly statements to customers over the entire month with the idea being that the processing load and cash flow will be more even. a. closed invoice b. open invoice c. cycle billing d. balance forward

c. cycle billing

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

c. goods billed to customers were shipped

The risks that may affect the revenue and cash collection processes include all of the following except: a. transactions may have been recorded in the wrong customer account b. transactions may be recorded in the wrong amount c. invalid transactions may have been omitted from the records d. transactions may not have been accumulated or transferred to the accounting records correctly

c. invalid transactions may have been omitted from the records

Personnel records will typically include all of the following, except: a. documentation related to initial hiring b. personal information, such as employee address c. medical history subsequent to hiring d. social security number

c. medical history subsequent to hiring

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

c. point of sale system

Which of the activities listed below is not part of the revenue cycle? a. sales order entry b. shipping c. Receiving d. Billing

c. receiving

The AICPA Trust Services Criteria categorizes IT controls and risks into five categories. Which of the following is not one of those categories? a. confidentiality b. security c. recovery d. availability

c. recovery

The advantages of e-commerce, or e-business, include all of the following except: a. reduced cost through lower marketing costs b. shorter sales cycles c. repudiation of sales transactions d. increased accuracy and reliability of sales data

c. repudiation of sales transactions

In a large company, the company needs to have in place systems and procedures to

capture the results of the sales transactions record the proper and complete sales transactions summarize and report the results of the transactions

a chronological listing of all payments

cash disbursements journal

the careful oversight of cash balances, forecasted cash payments, and forecasted cash receipts to insure that adequate cash balances exist to meed obligations

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