ITAC Final 4
Given the following facts: -Total monthly costs to operate the finishing department are $300,000 -The maximum number of products that the finishing department can complete in one month without working overtime is 1,800,000 -In the current month, the department completed 1,200,000 products What is the cost of unused capacity?
$100,000
Which of the following will limit a firm's potential loss exposure from paycheck forgery?
A separate payroll bank account
The receiving clerk at Folding Squid Technologies examines incoming shipments and reconciles their contents with the relevant purchase orders. A receiving report is then sent to accounts receivable and the vendor's invoice is approved for payment. Which of the following would correct control weaknesses, if any, related to these activities?
Accounts payable should reconcile the purchase order and the receiving report.
Which of the following would be an effective control for achieving the general control objectives in the general ledger and reporting system?
All of the above are appropriate.
In the payroll system, checks are issued to
All of the above are correct.
Payroll service bureaus and PEOs are especially attractive to small and midsized businesses for which of the following reason(s)?
All of these are correct.
Which of the following controls would be effective in preventing the threat that poor product design results in excess costs?
Analysis of warranty and repair costs.
Which control could be used to mitigate the threat of inaccurate updating of the general ledger?
Audit trail creating and review.
Which control could be used to mitigate the threat of fraudulent financial reporting?
Audit.
Which of the following controls could be used to mitigate the threat of disruption of operations?
Backup and disaster recovery plans.
A management report that measures four dimensions of performance: financial, internal operations, innovation and learning, and customer perspectives of the organization is known as
Balanced Scorecard
Which of the following is a control that addresses the threat of payroll processing errors?
Batch totals
The control that is used to match account numbers with account descriptions, to ensure that the correct general ledger account is being accessed is called
Closed-loop verification.
The purchasing manager at Folding Squid Technologies has responsibility for reviewing and authorizing purchase orders. Receiving reports are prepared by shipping and receiving based on the relevant purchase order(s). Purchase orders, receiving reports, and vendor invoices are reconciled by accounts payable, which authorizes payment. Which of the following would correct control weaknesses, if any, related to these activities?
Controls are adequate under the current system.
Entries that are made to counteract the effects of errors found in the general ledger are called
Corrections.
Which of the following controls could be used to mitigate the threat of uncollectible accounts?
Credit limits.
Which control could be used to mitigate the threat of hiring unqualified or larcenous employees?
Criminal background investigation checks of all applicants for finance related positions.
Which of the following controls could be used to mitigate the threat of inaccurate or invalid master data in the production cycle?
Data processing integrity controls.
Which document is used to reduce the balance owed to a supplier?
Debit memo
Recognizing advance insurance payments from customers as a liability would result in what type of adjusting entries?
Deferrals.
Cancelling all supporting documents when payment is made to a supplier is a control procedure designed to mitigate the threat of:
Duplicate payments
Which of the following controls could be used to mitigate the threat of unauthorized disclosure of sensitive information in the expenditure cycle?
Encryption.
Evaluated Receipt Settlement reduces the threat of:
Errors in supplier invoices
Which of the following is a control that addresses the threat of accidental entry of inaccurate time data into the payroll system?
Field checks
Which area provides information to the system about hiring, terminations, and pay rate changes?
HRM
What is financial electronic data interchange (FEDI)?
It is the combination of EFT and EDI that enables both remittance data and funds transfer instructions to be included in one electronic package.
When a person quits or is terminated from a company, what should be done with the person's record in the payroll system?
It needs to be kept at least until the end of the current year.
Which of the following controls could be used to mitigate the threat of kickbacks?
Job rotation and mandatory vacations.
The production planning method that is referred to as "pull manufacturing" is called
Lean manufacturing
Which control would help reduce the threat of cash flow problems?
Lockbox arrangements
Which control would help reduce the threat of theft of cash?
Lockbox arrangements
Data entry processing integrity controls such as field checks, completeness tests, and closed-loop verification are NOT needed for journal entries made by
Other accounting subsystems
Which of the following is a threat to the shipping process?
Picking the wrong items or the wrong quantity.
Whereas traditional cost accounting systems just assign the costs associated with research and development, expediting, and purchasing to overhead, activity-based costing systems would assign those costs to:
Product-related overhead
Which of the following controls could be used to mitigate the threat of accepting unordered items?
Requiring existence of approved purchase order prior to accepting any delivery.
Which of the following controls could be used to mitigate the threat of over- and underproduction?
Restriction of access to production orders and production schedules.
Which statement(s) about graphic design are true?
Reversing the sequence of years on the x-axis causes an increasing trend to look like a decreasing trend.
Which control could be used to mitigate the threat of inaccurate or invalid general ledger data?
Review of all changes to general ledger data.
Which of the following is the most important control for reducing the opportunity for fraud involving paycheck forgery?
Segregation of check distribution from payroll duties
Which of the following is a control that addresses the threat of unauthorized changes to the payroll master file?
Segregation of duties
Which of the following is not a common control for ensuring inventory is secure and inventory counts are accurate?
Sending "blind" copies of purchase orders to inventory control for data entry
Which XBRL document provides the instructions on how to display or print an XBRL-encoded report?
Style sheet
Separation of the check-writing and accounts payable functions is designed to mitigate the threat of:
Theft of cash
Which document is used to track the time worked by office professionals such as accountants and lawyers?
Time sheet
Which of the following is most likely to be a daily activity in the HRM/Payroll system?
Update HRM/Payroll database
Which control reduces the risk of theft or fraudulent distribution of paychecks?
Use of a separate checking account for payroll
A legal contract that defines responsibility for goods while they are in transit is called
a bill of lading.
Information found on the materials requisition form is based in part on information obtained from which other form?
a bill of materials.
What is probably the most effective control for the prevention of kickbacks to purchasing agents?
a corporate policy to prohibit purchasing agents from accepting kickbacks
The document that authorizes the removal of the necessary quantity of raw materials from storeroom to factory is referred to as
a materials requisition.
A "zero balance check" refers to which of the following control procedures?
a payroll clearing account
A voucher package should include
a purchase order, vendor invoice, and receiving report.
A document that records the employee's arrival and departure times for each work shift is known as
a time card.
Which control would be best to prevent payments made to fictitious vendors?
allow payments only to approved vendors
The results of an internal audit finds that there is a problem with inaccurate time data being entered into the payroll system. What is an applicable control that can help prevent this event from occurring in the future?
automation of data collection
What is the best control to reduce the risk of losing payroll data?
backup and disaster recovery procedures
Dolly Salem owns and operates a bakery in Charleston, South Carolina. She maintains a file of recipes that list the ingredients used to make her famous cakes and cookies. These recipes are examples of a(an)
bill of materials.
The bill of materials shows the __________ of each product component.
both A and B
The final activity in the general ledger and reporting system is the production of various managerial reports. The report that shows planned cash inflows and outflows for each project is the
capital expenditures budget.
The _____, who reports to the treasurer, is responsible for paying suppliers.
cashier.
What is the payroll system's principal output?
checks to employees
Which activity below is not performed by the HRM?
compensation
Which control would be most appropriate to address the problem of inaccurate payroll processing?
cross-footing of the payroll register
Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he complained that a recent shipment from a vendor had been unsatisfactory and so had to be returned. That required the purchasing manager to send a _____ to the supplier.
debit memo
To curtail the threat of theft or destruction of inventories and other fixed assets, the organization may wish to implement which of the following controls?
document all movement of inventory through the production process.
There are several threats that are associated with the process and activity of receiving and storing goods. Identify one of these threats below:
errors in counting
The primary control benefit associated with issuing earnings statements to employees is to reduce the threat of
errors in processing payroll.
What step can be taken to reduce the distribution of fraudulent paychecks?
have internal audit investigate unclaimed paychecks
Which of the following is not a potential effect of inaccurate time data?
inaccurate calculation of overhead costs
Using biometrics to authenticate time cards reduces the risk of _____.
inaccurate time and attendance data.
A cost system that assigns costs to specific production batches or jobs is known as
job-order costing.
To more effectively use employees' knowledge and skills, many organizations are implementing _____.
knowledge management systems.
Which control procedure is designed to minimize the threat of posting errors to accounts receivable?
mailing of monthly statements to customers
The form in the production cycle that specifies how much of each product is to be produced during the planning period and when product should begin is the
master production schedule.
An approach to inventory management that seeks to reduce required inventory levels by improving the accuracy of forecasting techniques to better schedule purchases to satisfy production needs is called
materials requirements planning.
A _____ authorizes the transfer of raw goods needed for production from the storeroom to the production facilities.
materials requisition
Dolly Salem owns and operates a bakery in Charleston, South Carolina. Each afternoon she prepares a shopping list that describes the number and variety of ingredients that she will purchase in the evening from a local food wholesaler. This list is an example of a(an)
materials requisition.
To minimize the risk of theft of consumer remittances, the person who handles and deposits customer payments can also
none of these activities can be performed by the person who handles and deposits customer payments
A method for processing accounts payable in which each approved invoice is posted to individual supplier records in the accounts payable file and is then stored in an open invoice file is called
nonvoucher system.
Dolly Salem owns and operates a bakery in Charleston, South Carolina. She maintains a file that lists the sequence of procedures required to make each of her famous cakes and cookies. These instructions are examples of a(an)
operations list.
Double-checking the accuracy of an invoice is an applicable control that can help to neutralize a threat in the expenditure cycle. What process or activity would specifically be associated with this control?
pay for goods and services
Theft or fraudulent distribution of payroll checks is a potential threat to the payroll processing activity. What is one control that can be implemented to help prevent paychecks being issued to a "phantom" or "ghost" employee?
paychecks should be physically distributed by someone who does not authorize or record payroll
There are four basic activities performed in the general ledger and reporting system. Several of these activities represent the basic steps in the accounting cycle. In what step is the adjusted trial balance prepared?
post adjusting entries
What document authorizes the manufacturing of a product?
production order
A document authorizing the manufacture of a specified quantity of a particular product is called
production order.
Dolly Salem owns and operates a bakery in Charleston, South Carolina. Each morning she prepares a list that describes the number and variety of cakes and cookies that will be prepared during the day. This list is an example of a(an)
production order.
Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he proudly announced that he had received a _____ from a client to buy a large quantity of components from Folding Squid.
purchase order
Duties in the expenditure cycle should be properly segregated to promote internal control. This means that the authorization function is performed by _____, the recording function is performed by _____, and the cash disbursement function is performed by the _____.
purchasing; accounts payable; cashier
A request by an organization or department for suppliers to bid to supply a fixed asset that possesses specific characteristics is called
request for proposal.
Which of the following is used to change a customer's accounts receivable balance?
sales invoice
The key to preventing unauthorized changes to the payroll master file is
segregation of duties between the authorization of changes and the physical handling of paychecks.
In a typical cash disbursement procedure, who usually handles the checks and may even be able to sign checks up to a certain dollar limit?
the cashier
The fourth step in the payroll cycle is preparing payroll. Pay rate information is needed in order to complete this task. The pay rate information is accessed by the system from __________.
the payroll master file
Restricting physical access to inventory is designed to minimize the threat of
theft of inventory
What is the purpose of a general ledger payroll clearing account?
to check the accuracy and completeness of payroll recording and its allocation to cost centers
Segregating the duties of HRM and payroll functions reduces the risk of _____.
unauthorized changes to payroll master data.
Encryption of payroll master data is a control designed to reduce the risk of _____.
unauthorized disclosure of sensitive information.
The first step in the payroll process is to
update the payroll master file.
Which of the following controls is inappropriate for payroll check writing?
use of a payroll clearing account
What is the easiest way to prevent the acceptance of unordered goods?
ys require that a valid purchase order exists before goods can be accepted at the time of delivery