Question 1

Internal controls in an Evaluated Receipts Settlement (ERS) system _______.
A)are generally not required
B)are dissimilar to internal controls in a traditional computerized system
C)are similar to internal controls in a traditional computerized system
D)should be audited by the internal audit function, due to their increased familiarity with this function

Accepted Answer

Internal controls in an ERS system are similar to internal controls in a traditional computerized system. This is because the objective of internal controls is to ensure accuracy and completeness of data, regardless of the system or process employed. Correct controls should be established, such as segregation of duties, security controls, and management oversight, to minimize the risk of fraud or error.

Question 2

Which of the following is performed by Electronic Invoice Presentment and Payment (EIPP) systems?
A)Purchasing an electronic system that uses a third-party payment process to settle a business to business transaction
B)Creating a shipping notice system
C)Purchasing an evaluated receipt system
D)Processing a payment from the purchaser to the supplier as an independent third party

Accepted Answer

The answer of Which of the following is performed by...

Question 3

Which of the following is a form showing the description, quantity, and other data pertaining to the goods the vendor has authorized the purchaser to return?
A)Purchase return authorization
B)Report return authorization
C)Return authorization
D)Form authorization

Accepted Answer

Purchase return authorization is the form that includes details such as description, quantity, and other relevant data about the goods that the vendor allows the purchaser to return.

Question 4

Which of the following is one of the key controls that are often found in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements, categorized by relevant assertion?
A)Completeness of cash disbursements
B)Cash payments
C)Evaluation of Receipts Settlement
D)Evaluation of Receipts Statement

Accepted Answer

The key control in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements that relates to the completeness of cash disbursements is the matching of purchase orders, delivery receipts, and invoices to ensure that all goods and services received have been properly invoiced and paid for. This control helps to ensure that no cash disbursements are missing, leading to completeness of cash disbursements assertion. The other options (B, C, and D) are not relevant controls for this assertion.

Question 5

When there is the potential for material misstatements from purchase adjustments transactions, _______.
A)the auditor should obtain an understanding of all immaterial aspects of the internal control structure components and consider the factors that affect the risk of such misstatements
B)the auditor should obtain an understanding of all relevant aspects of the internal control structure components and consider the factors that affect the risk of such misstatements
C)the auditor should obtain an understanding of all relevant aspects of the client legal counsel's internal control structure components and consider the factors that affect the risk of such misstatements
D)the auditor should obtain an understanding of all relevant aspects of the external control structure components and consider the factors that affect the risk of such misstatements

Accepted Answer

When there is the potential for material misstatements from purchase adjustments transactions, the auditor should obtain an understanding of all relevant aspects of the internal control structure components and consider the factors that affect the risk of such misstatements. In order to assess the risk of material misstatement, the auditor needs to consider both the inherent risk in the transaction and the effectiveness of the client's internal controls in recognizing and preventing misstatements. Therefore, understanding all relevant aspects of the internal control structure components is necessary.

Question 6

What is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction called?
A)Evaluated Receipts Settlement
B)Completeness of cash disbursements
C)Evaluation of Receipts Settlement
D)Cash disbursements

Accepted Answer

Evaluated Receipts Settlement (ERS) is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. It eliminates the need for a separate invoice from the supplier and automatically triggers payment once the goods or services are received and accepted by the purchaser. Options B, C, and D relate to different aspects of cash disbursements and are not relevant to the question.

Question 7

Evaluated Receipts Settlement (ERS) is _______.
A)a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction.
B)a highly-manual business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction.
C)a highly-automated business process between suppliers and stockholders to exchange data electronically and electronically execute a purchase transaction.
D)a highly-manual business process between creditors and purchasers to exchange data electronically and electronically execute a purchase transaction.

Accepted Answer

Evaluated Receipts Settlement (ERS) is a highly-automated business process that allows suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction. This process eliminates the need for manual invoice verification and reduces processing time and costs. Therefore, option A is the correct answer.

Question 8

One of the common disclosures in the _______ is reclassification of material debit balances in accounts payable as accounts receivable.
A)purchase transactions
B)net sale transactions
C)purchase adjustments
D)purchasing process

Accepted Answer

Reclassification of material debit balances in accounts payable as accounts receivable is a common disclosure in the purchasing process. This adjustment is made to accurately reflect the nature of the transaction in the financial statements, where a debit balance in accounts payable (typically a credit balance account) indicates an amount owed to the company, thus more appropriately classified as an account receivable.

Question 9

In larger public companies, Evaluated Receipts Settlement (ERS) transactions represent _______.
A)50 - 75% of all transactions
B)75 - 90% of all transactions
C)0 - 25% of all transactions
D)25- 50% of all transactions

Accepted Answer

In larger public companies, ERS transactions represent 75-90% of all transactions.

Question 10

Important documents and records used in processing purchase adjustments in traditional or Evaluated Receipts Settlement (ERS) systems include which of the following?
A)Purchase Return Authorization
B)Shipping Report
C)Debit Memo
D)All of these answer choices are correct.

Accepted Answer

Purchase adjustments in traditional or ERS systems require documentation to support the adjustment. Purchase Return Authorization, Shipping Report, and Debit Memo are all important documents and records used in processing purchase adjustments, making option D the correct choice.

Question 11

Purchase returns and allowances involve _______.
A)reducing payables and expenses, improving reported liquidity and earnings
B)increasing payables and expenses, improving reported liquidity and earnings
C)reducing payables and expenses, decreasing reported liquidity and earnings
D)increasing payables and expenses, decreasing reported liquidity and earnings

Accepted Answer

Purchase returns and allowances involve reducing payables and expenses, which improves reported liquidity and earnings. When a company returns goods to a supplier or receives a reduction in the purchase price due to a defect or other issue, the amount owed to the supplier is decreased, resulting in a reduction of payables. Additionally, the expense associated with the original purchase is reduced, which can improve reported earnings.

Question 12

Evaluated Receipts Settlement (ERS) recognizes the key elements of a purchase transaction involving _______.
A)the nature and quantity of the goods received
B)the price of the goods received
C)the payment terms for the goods received
D)All of these answer choices are correct

Accepted Answer

ERS recognizes all three key elements of a purchase transaction: the nature and quantity of the goods received, the price of the goods received, and the payment terms for the goods received.

Question 13

In smaller, privately owned companies, not-for-profit organizations, or governments, Evaluated Receipts Settlement (ERS) transactions are _______.
A)rare
B)commonplace
C)increasing being used
D)prohibited.

Accepted Answer

Evaluated Receipts Settlement (ERS) transactions are not very common in smaller, privately owned companies, not-for-profit organizations, or governments.

Question 14

Procurement fraud risks include _______.
A)phantom vendors
B)fictitious invoices
C)kickbacks and bid rigging
D)All of these answer choices are correct.

Accepted Answer

All the options listed (phantom vendors, fictitious invoices, kickbacks and bid rigging) are significant procurement fraud risks.

Question 15

Auditors often use test data on programmed application controls _______.
A)to determine how likely the system is to hacking and phishing attempts
B)to ensure expected results do not appear on exception reports
C)to determine whether expected results appear on exception reports
D)as a way to enter dummy transactions designed to increase audit fees

Accepted Answer

Test data is often used by auditors to determine whether expected results appear on exception reports. This helps to identify any discrepancies or errors in the application controls that may need to be addressed. Using test data in this way can also help to increase the effectiveness and efficiency of audits. Option A is incorrect because test data is not used to determine how likely the system is to hacking and phishing attempts; rather, it is used to assess the accuracy of application controls. Option B is incorrect because auditors generally want to ensure that expected results do appear on exception reports, as this indicates that the controls are working as intended. Option D is incorrect and suggests ill motives on the part of the auditor.

Question 16

Most auditors plan to test controls in the purchases cycle because of the _______.
A)high volume of routine transactions in this process
B)low volume of routine transactions in this process
C)high volume of irregular transactions in this process
D)low volume of irregular transactions in this process

Accepted Answer

The purchases cycle involves a high volume of routine transactions such as purchase orders, receipts, and payments. Therefore, most auditors plan to test controls in the purchases cycle to ensure that these routine transactions are properly authorized, recorded, and processed.

Question 17

What is a shipping report?
A)A report prepared on the shipment of goods being returned to vendors and showing the type and quantities of goods shipped
B)A return authorization report
C)A report stating the particulars of a debit to accounts payable, including the specific items returned, prices, and amount debited
D)A report stating the particulars of a debit to accounts payable, including the specific items returned, prices, and amount credited

Accepted Answer

A shipping report is a report that provides details of the shipment of goods, including the type and quantities of goods shipped. It is typically used to track goods being returned to vendors. Choices B, C, and D are not accurate descriptions of a shipping report.

Question 18

If purchase adjustments are estimated at quarter end, _______.
A)management should establish controls to ensure adjustments are made based on analysts' information and that adjustments are consistent from quarter to quarter
B)the auditor should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter
C)management should establish controls to ensure adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter
D)management should establish controls to ensure adjustments are made based on regulatory information and that adjustments are consistent from quarter to quarter

Accepted Answer

Management is responsible for ensuring that purchase adjustments are made based on reliable information and that adjustments are consistent from quarter to quarter. It is important for management to establish controls to ensure that the estimated adjustments are based on accurate and reliable information. Consistency from quarter to quarter is also important to ensure the reliability and comparability of financial statements. The auditor should review management's controls and the reliability of the information used to estimate purchase adjustments. However, the responsibility for ensuring the accuracy and consistency of these adjustments rests with management. Assertions based on analysts' or regulatory information may be relevant, but reliability and consistency are the primary concerns.

Question 19

There should be adequate segregation of duties between _______.
A)obtaining authorization for purchase returns, shipping goods, and recording debit memos
B)obtaining authorization for purchase returns, selling goods, and recording debit memos
C)obtaining authorization for purchase returns, shipping goods, and recording credit memos
D)obtaining authorization for purchase returns, selling goods, and recording payables memos

Accepted Answer

Obtaining authorization for purchase returns should be segregated from shipping goods and recording debit memos to prevent the same person from both authorizing the return and handling the goods or recording the transaction.

Question 20

The first step in initiating an Evaluated Receipts Settlement (ERS) transaction is the _______.
A)contract, which may be the only "electronic" element in the process.
B)payment, which may be the only "paperwork" in the process.
C)contract, which may be the only "paperwork" in the process.
D)payment, which may be the only "electronic" element in the process.

Accepted Answer

The first step in initiating an ERS transaction is the contract, which may be the only paperwork in the process. This is because ERS is a process where a supplier's invoice is matched with the purchase order and goods receipt, and payment is automatically initiated without the need for manual validation or approval. Therefore, the contract is essential to establish the terms and conditions of the transaction, including the goods or services to be provided, pricing, and delivery schedules.

Quiz 12: Auditing the Purchases Cycle and Payroll Cycle

Internal controls in an Evaluated Receipts Settlement (ERS) system _______.

Which of the following is performed by Electronic Invoice Presentment and Payment (EIPP) systems?

Which of the following is a form showing the description, quantity, and other data pertaining to the goods the vendor has authorized the purchaser to return?

Which of the following is one of the key controls that are often found in the purchaser's Evaluated Receipts Settlement (ERS) system for cash disbursements, categorized by relevant assertion?

When there is the potential for material misstatements from purchase adjustments transactions, _______.

What is a highly-automated business process between suppliers and purchasers to exchange data electronically and electronically execute a purchase transaction called?

Evaluated Receipts Settlement (ERS) is _______.

One of the common disclosures in the _______ is reclassification of material debit balances in accounts payable as accounts receivable.

In larger public companies, Evaluated Receipts Settlement (ERS) transactions represent _______.

Important documents and records used in processing purchase adjustments in traditional or Evaluated Receipts Settlement (ERS) systems include which of the following?

Purchase returns and allowances involve _______.

Evaluated Receipts Settlement (ERS) recognizes the key elements of a purchase transaction involving _______.

In smaller, privately owned companies, not-for-profit organizations, or governments, Evaluated Receipts Settlement (ERS) transactions are _______.

Procurement fraud risks include _______.

Auditors often use test data on programmed application controls _______.

Most auditors plan to test controls in the purchases cycle because of the _______.

What is a shipping report?

If purchase adjustments are estimated at quarter end, _______.

There should be adequate segregation of duties between _______.

The first step in initiating an Evaluated Receipts Settlement (ERS) transaction is the _______.