AIS Chaper 8
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.
A
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.
A
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
A
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.
A
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
A
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.
A
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.
A
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.
A
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
A
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.
A
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
A
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
B
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
B
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
B
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.
B
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
B
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
B
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
B
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.
B
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
B
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
B
67. Application controls of the IT system would include: A. Availability B. Accuracy and Completeness C. Security D. Processing Integrity
B
72. The risks of e-commerce, or e-business, include all of the following, except: A. Confidentiality B. Accuracy C. Security D. Processing Integrity
B
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
B
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
B
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
C
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.
C
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
C
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
C
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.
C
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
C
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
C
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
C
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
C
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
C
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
C
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
D
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
D
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
D
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
D
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
D
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
D
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.
D
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
D
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
D
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.
F
101. In order to meet the objectives of internal controls, individuals with authoritative responsibilities need to have access to the record keeping functions.
F
104. Independent checks and reconciliations should be preformed on a regular basis as part of the segregation of duties area of internal controls.
F
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.
F
115. At a minimum, those who handle cash should be the ones to reconcile the bank statement.
F
119. Access to cash collections needs to limited to those who are expressly authorized to record the cash transactions.
F
123. The use of control totals and related acknowledgments can reduce the risk of denial of service attacks by hackers.
F
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.
F
88. Even though most companies collect order data from customers, the manner of receiving order data seldom varies.
F
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.
F
95. When the customer is billed, the accounts receivable records should be updated to reflect the decreased balance.
F
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.
F
102. Record files related to sales can be organized by customer name or by the numerical sequence of the documents.
T
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.
T
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.
T
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.
T
96. The existence of good internal controls do not ensure high sales and profits.
T