AIS Ch. 6, 8-11 Multiple Choice
Which of the following is not a part of "adequate documents and records" for fixed assets? a. Fixed asset journal b. Fixed asset subsidiary ledger c. Purchase order d. Fixed asset tags
A. A fixed asset journal
The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the a. Authorization of transactions from the custody of related assets b. Operational responsibility from the record-keeping responsibility c. Human Resources function from the controllership function d. Administrative controls from the internal accounting controls
A. Authorization of transactions from the custody of related assets
When a company sells items over the Internet, there are many IT risks. The risk of hardware and software failures that prevent website sales would be a(n) a. Availability risk b. Processing integrity risk c. Security risk d. Confidentiality risk
A. Availability risk
A manager suspects that certain employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendor's invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and related vouchers. To trace whether this is actually happening, it would be best to begin tracing from the a. Cash disbursements b. Approved vouchers c. Receiving reports d. Vendor's invoices
A. Cash disbursements
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 the customer's credit d. Correct sales price
A. Date of delivery
The document prepared when purchased items are returned is a(n) a. Debit memo b. Invoice c. Receiving report d. Sales journal
A. Debit memo
Which of the following departments or positions most likely would approve changes in pay rates and deductions from employee salaries? a. Human resources b. Treasurer c. Controller d. Payroll
A. Human resources
The primary difference between ERP and ERP II systems is that ERP II may include a. Internet EDI b. Logistics modules c. Reporting modules D. A data warehouse
A. Internet EDI
Which of the following statements concerning an operations list is true? a. It is an engineering document that describes the chain of events within a company's conversion process b. It is an engineering document that specifies the descriptions and quantities of component parts within a product c. It is a capital budgeting document that describes the chain of events within a company's conversion process d. It is a capital budgeting document that specifies the descriptions and quantities of component parts within a product
A. It is an engineering document that describes the chain of events within a company's conversion process
Which of the following procedures would be most useful in determining the effectiveness of a company's internal controls regarding the existence or occurrence of payroll transactions? a. Observe the segregation of duties concerning personnel responsibilities and payroll disbursement b. Inspect evidence of accounting for prenumbered payroll checks c. Recompute the payroll deductions for employee fringe benefits d. Verify the preparation of the monthly payroll account bank reconciliation
A. Observe the segregation of duties concerning personnel responsibilities and payroll disbursement
For a given pay period, the complete listing of paychecks for the pay period is a a. Payroll register b. Payroll ledger c. Payroll journal d. Paymaster
A. Payroll register
Which of the following advantages is least likely to be experienced by a company implementing an enterprise resource planning (ERP) system? a. Reduced cost b. Improved efficiency c. Broader access to information d. Reduced errors
A. Reduced cost
Which of the following internal controls would help prevent overpayment to a vendor or duplicate payment to a vendor? a. Review and cancellation of supporting documents after issuing payment b. Requiring the check signer to mail the payment directly to the vendor c. Review of the accounts where the expenditure transaction has been recorded d. Approving the purchase before the goods are ordered from the vendor
A. Review and cancellation of supporting documents after issuing payment
Which of the following reviews would be most likely to indicate that a company's property, plant, and equipment accounts are not understated? a. Review of the company's repairs and maintenance expense accounts b. Review of supporting documentation for recent equipment purchases c. Review and recomputation of the company's depreciation expense accounts d. Review of the company's miscellaneous revenue account
A. Review of the company's repairs and maintenance expense accounts
When additional procedures are necessary to bring a defective product up to its required specifications, this is referred to as a. Rework b. Scrap c. Work in process d. Variance reporting
A. Rework
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 meeting the control objective of the safeguarding of assets, which departments should be responsible for distribution of paychecks and custody of unclaimed checks, respectively? Distribution of paychecks Custody of unclaimed paychecks a. Treasurer Treasurer b. Payroll. Treasurer c. Treasurer Payroll d. Payroll. Payroll
A. Treasurer Treasurer
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 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 the accounts receivable subsidiary ledger d. Bank for comparison with deposit slips
A. Treasurer for comparison with the monthly bank statement
Which of the following is most likely to be effective in deterring fraud by upper-level managers? a. Internal controls b. An enforced code of ethics c. Matching documents prior to payment d. Segregating custody of inventory from inventory and record keeping
B. An enforced code of ethics
A payroll voucher a. Authorized an employee paycheck to be written b. Authorizes the transfer of cash from a main operating account to a payroll account c. Authorized the transfer of cash from a payroll account to a main operating account d. Authorized the paymaster to distribute paychecks
B. Authorizes the transfer of cash from a main operating account to a payroll account
The goal of a physical inventory reconciliation is to a. Determine the quantity of inventory sold b. Compare the physical count with the perpetual records c. Compare the physical count with the periodic records d. Determine the quantity of inventory in process
B. Compare the physical count with the perpetual records
In the late 1990s, the Y2K compatibility issue was concerned primarily with computer systems' a. File retrieval capability b. Data storage c. Human resource comparisons d. Capital budgeting
B. Data storage
For proper segregation of duties, the department that should authorize new employees for payroll would be a. Payroll b. Human resources c. Cash disbursements d. General ledger
B. Human resources
Which of the following is not a feature of an ERP system's database? a. Increased efficiency b. Increased need for data storage within functional areas c. Increased customer service capability d. Increased data sharing across functional areas
B. Increased need for data storage within functional areas
Which of the following is not considered a benefit of using computerized conversion systems? a. Automatic computation of materials requirements b. Increased sales and cost of sales c. Increased efficiency and flexibility d. Early error detection and increased accuracy
B. Increased sales and cost of sales
Input controls such as field check, validity check, limit check, and reasonableness check are useful in IT systems of purchasing processes to lessen which of the following risks? a. Unauthorized access b. Invalid data entered by vendors c. Repudiation of purchase transactions d. Virus and worm attacks
B. Invalid data entered by vendors
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 risks
For proper segregation of duties in cash disbursements, the person who signs checks also a. Reviews the monthly bank reconciliation b. Returns the checks to accounts payable c. Is denied access to the supporting documents d. Is responsible for mailing the checks
B. Returns the checks to accounts payable
One of the most critical controls to prevent theft of inventory purchased is to a. Require authorization of the purchase requisition b. Segregate inventory custody from inventory record keeping c. Compare the PO, receiving report, and invoice d. Segregate the authorization of purchases from the inventory record keeping
B. Segregate inventory custody from inventory record keeping
Within accounts payable, to ensure that each voucher is submitted and paid only once, each invoice approved to be paid should be a. Supported by a receiving report b. Stamped "paid" by the check signer c. Prenumbered and accounted for d. Approved for authorized purchases
B. Stamped "paid" by the check signer
Which of the following ERP approaches accomplishes the ERP implementation beginning with one department? a. The pilot method b. The modular implementation approach c. The Big Bang approach d. The location-wise implementation method
B. The modular implementation approach
Within cash disbursements, all of the following should be true before a check is prepared, except that a. The PO, receiving report, and invoice have been matched b. The purchased goods have been used c. Sufficient cash is available d. The invoice discount date or due date is imminent
B. The purchased goods have been used
Internal control is strengthened by the use of a blind purchase order, upon which the quantity of goods ordered is intentionally left blank. This blind copy is used in which department? a. The department that initiated the purchase request b. The receiving department c. The purchasing department d. The accounts payable department
B. The receiving department
Which of the following statements best describes the risks of ERP systems? a. The risks of implementing and operating ERP systems are nearly identical to the risks of implementing and operating IT systems b. The risks of operating and implementing ERP systems are greater than the risks of implementing and operating IT systems, due to the scope, size, and complexity of ERP systems c. The risks of implementing ERP systems are greater than the risks of implementing IT systems, but the operating risks are nearly identical d. The risks of operating ERP systems are greater than the risks of operating IT systems, but the implementation risks are nearly identical
B. The risks of operating and implementing ERP systems are greater than the risks of implementing and operating IT systems, due to the scope, size, and complexity of ERP systems
Which of the following is not an independent verification related to cash disbursements? a. The cash disbursements journal is reconciled to the general ledger b. The stock of unused checks should be adequately secured and controlled c. The bank statement is reconciled on a monthly basis d. The accounts payable subsidiary ledger is reconciled to the general ledger
B. The stock of unused checks should be adequately secured and controlled
A firm expects to sell 1,000 units of its best selling product in the coming year. Ordering costs for this par duct are $100 per order, and carrying costs are $2 per unit. Compute the optimum order size, using the EOQ model. a. 10 units b. 224 units c. 317 units d. 448 units
C. 317 units
Which of the given departments will immediately adjust the vendor account for each purchase transaction so that the company will know the correct amount owed to the vendor? a. Purchasing b. Receiving c. Accounts payable d. Shipping
C. Accounts payable
Which of the following questions is most likely to be found on an internal control questionnaire concerning a company's conversion processes? a. Are vendor invoices for materials purchases approved for payment by someone who is independent of the cash disbursements function? b. Are signed checks for materials purchased mailed promptly without being returned to the department responsible for processing the disbursement? c. Are approved requisitions required when materials are released from the company's warehouse into production? d. Are details of payments for materials balanced to the total posted to the general ledger?
C. Are approved requisitions required when materials are released from the company's warehouse into production?
Internal control problems would be likely to result if a company's payroll department supervisor was also responsible for a. Reviewing authorization forms for new employees b. Comparing the payroll register with the batch transmittal data c. Authorizing changes in employee pay rates d. Hiring subordinates to work in the payroll department
C. Authorizing changes in employee pay rates
Which of the following statements about payroll and fixed asset processes is true? a. Both have only routine processes b. Both have only no routine processes c. Both have routine and no routine processes d. Payroll has only routine processes, while fixed asset has only no routine processes
C. Both have routine and no routine processes
The source document that initiatives the recording of the return and the adjustment to the customer's credit status is the a. Pick list b. Sales journal c. Credit memorandum d. Sales invoice
C. Credit memorandum
Which of the following IT systems is designed to avoid the document matching process and is an "invoice less" system? a. Computer-based matching system b. Electronic data interchange c. Evaluated receipt settlement d. Microsoft Dynamics GP
C. Evaluated receipt settlement
The purpose of tracing sales invoices to shipping documents would be to provide evidence that a. Shipments to customers were properly invoiced b. No duplicate shipments or billings occurred c. Goods billed to customers were shipped d. All prenumbered sales invoices were accounted for
C. Goods billed to customers were shipped
Which of the following activities is not part of the planning component of the logistics function? a. Research and development b. Capital budgeting c. Human resource management d. Scheduling
C. Human resource management
Which of the following is not an advantage of fixed asset software systems when compared with spreadsheets? a. Better ability to handle non financial data such as asset location b. Easier to apply different depreciation policies to different assets c. Manual processes to link to the general ledger d. Expanded opportunities for customized reporting
C. Manual process to link to the general ledger
Which of the following is not an independent check within payroll processes? a. Time sheets are reconciled with production records b. Time sheets are reconciled with the payroll register c. Paychecks are prepared on prenumbered checks d. The payroll register is reconciled with the general ledger
C. Paychecks are prepared on prenumbered checks
An IT system that uses touch screens, bar-coded products, and credit card authorization during the sale is called a(n) a. Electronic data interchange system b. E-commerce c. Point of sale system d. E-payables system
C. Point of sale system
In a system of proper internal controls, the same employee should not be allowed to a. Sign checks and cancel the supporting voucher package b. Receive goods and prepare the related receiving report c. Prepare voucher packages and sign checks d. Initiative purchase requisitions and inspect goods received
C. Prepare voucher packages and sign checks
An example of an independent verification in the sales process is a. Preparation of packing 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
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
C. Receiving clerk
Which of the following activities is an inventory control activity? a. Engineering b. Maintenance c. Routing d. Quality control
C. Routing
What company developed the first true ERP systems? a. Microsoft b. Peoplesoft c. SAP d. IBM
C. SAP
Manufacturing companies implement ERP systems for the primary purpose of a. Increasing productivity b. Reducing inventory quantities c. Sharing information d. Reducing investments
C. Sharing information
Which of the following terms relates to the control of materials being held for future production? a. Routing b. Work in process c. Stores d. Warehousing
C. Stores
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
Which of the following is not one of the reasons for increased spending on ERP systems in recent years? a. The need for Sarbanes-Oxley compliance b. Globalization and increased competitive pressures c. The need for earnings management d. The need for customer service enhancements
C. The need for earnings management
If a manufacturing company's inventory of supplies consists of a large number of small items, which of the following would be considered a weakness in internal controls? a. Supplies of relatively low value are expensed when acquired b. Supplies are physically counted on a cycle basis, whereby limited counts occur quarterly and each item is counted at least once annually c. The stores function is responsible for updating perpetual records whenever inventory items are moved d. Perpetual records are maintained for inventory items only if they are significant in value
C. The stores function is responsible for updating perpetual records whenever inventory items are moved
The type of ERP system used by large, multinational corporations is known as a. Big Bang implementation b. Modular implementation c. Tier one software d. Tier two software
C. Tier one software
The term conversion processes is often used synonymously with a. Operations b. Production c. Manufacturing d. All of the above
D. All of the above
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
D. Allowance for uncollectible accounts
The purchase of fixed assets is likely to require different authorization processes than the purchase of inventory. Which of the following is not likely to be part of the authorization of fixed assets? a. Specific authorization b. Inclusion in the capital budget c. An investment analysis or feasibility analysis of the purchase d. Approval of the depreciation schedule
D. Approval of the depreciation schedule
Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchase transactions? a. Is an authorized PO required before the receiving department can accept a shipment or the accounts payable department can record a voucher? b. Are prenumbered purchase requisitions used, and are they subsequently matched with vendor invoices? c. Is there a regular reconciliation of the inventory records with the file of unpaid vouchers? d. Are prenumbered POs, receiving reports, and vouchers used, and are the entire sequences accounted for?
D. Are prenumbered POs, receiving reports, and vouchers used, and are the entire sequences accounted for?
Supply chain management (SCM) is a critical business activity that connects a company more closely with its a. Customers B. Suppliers c. Subsidiaries d. Customers and suppliers
D. Customers and suppliers
A company's internal controls may mandate the distribution of paychecks by an independent paymaster in order to determine that a. Payroll deductions are properly authorized and computed b. Pay rates are properly authorized and separate from the operating function c. Each employee's paycheck is supported by an approved time sheet d. Employees included in the period's payroll register actually exist and are currently employed
D. Employees included in the period's payroll register actually exist and are currently employed
Which of the following questions would be least likely to appear on an internal control questionnaire regarding the initiation and execution of new property, plant, and equipment purchases? a. Are requests for repairs approved by someone higher than the department initiating the request? b. Are prenumbered purchase orders used and accounted for? c. Are purchase requisitions reviewed for consideration of soliciting competitive bids? d. Is access to the assets restricted and monitored?
D. Is access to the assets restricted and monitored?
For which of the following computerized conversion systems is Walmart well known? a. CAD/CAM b. MRP-II c. CIMs d. JIT
D. JIT
Which of the following represents a method of managing inventory designed to minimize a company's investment in inventories by scheduling materials to arrive at the time they are needed for production? a. The economic order quantity (EOQ) b. Material resource planning (MRP) c. First in, first out (FIFO) d. Just in time (JIT)
D. JIT
Manufacturing has changed in recent years as a result of each of the following factors except a. Globalization b. Technological advances c. Increased competition d. Lack of economic prosperity
D. Lack of economic prosperity
Which of the following is not a document that is part of the cash collection process? a. Remittance advice b. Cash receipt journal c. Bank deposit slip d. Packing slip
D. Packing slip
An ERP system is a software system that provides each of the following except a. Collection, processing, storage, and reporting of transactional data b. Enhancement of e-commerce and e-business c. Coordination of multiple business processes d. Physical controls for the prevention of inventory theft
D. Physical controls for the prevention of inventory theft
Personnel who work in the receiving area should complete all of the following processes except a. Counting the goods received b. Inspecting goods received for damage c. Preparing a receiving report d. Preparing an invoice
D. Preparing an invoice
Which of the following is not a method of unethically inflating sales revenue? a. Channel stuffing b. Holding sales open c. Premature recognition of contingent sales d. Promotional price discounts
D. Promotional price discounts
The use of electronic data interchange (EDI) to conduct sales electronically has both risks and benefits. Which of the following is a benefit of EDI, rather than a risk? a. Incomplete audit trail b. Repudiation of sales transactions c. Unauthorized access d. Shorter inventory cycle time
D. Shorter inventory cycle time
The term "ghost employee" means that a. Hours worked has been exaggerated by an employee b. False sales have been claimed to boost commission earned c. Overtime hours have been inflated d. Someone who does not work for the company receives a paycheck
D. Someone who does not work for the company receives a paycheck
Within the purchasing processes, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing processes? a. The invoice b. The receiving report c. The purchase order d. The purchase requisition
D. The purchase requisition
To ensure that all credit sales transactions 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 sales journal
D. The supervisor of the billing department matches prenumbered shipping documents with entries recorded in the sales journal
An integrated IT system of payroll and Human Resources may have extra risks above those of a manual system. Passwords and access logs are controls that should be used in these integrated systems to lessen the risk of a. Hardware failures b. Erroneous data input c. Payroll data that does not reconcile to time cards d. Unauthorized access to payroll data
D. Unauthorized access to payroll data
Which of the following controls is not normally performed in the accounts payable department? a. The vendor's invoice is matched with the related receiving report b. Vendor invoices are selected for payment c. Asset and expense accounts to be recorded are assigned d. Unused purchase orders and receiving reports are accounted for
D. Unused purchase orders and receiving reports are accounted for
Which of the following internal controls is typically associated with the maintenance of accurate inventory records? a. Performing regular comparisons of perpetual records with recent costs of inventory items b. Using a just in time system to keep inventory levels at a minimum c. Performing a match of the purchase request, receiving report, and purchase order before payment is approved d. Using physical inventory counts as a basis for adjusting the perpetual records
D. Using physical inventory counts as a basis for adjusting the perpetual records
