Question 1

An automated cash disbursements system can yield better cash management since payments are made on time.

Accepted Answer

An automated cash disbursements system ensures that payments are made on time, preventing late fees and penalties. This can help improve cash management by avoiding unnecessary costs and ensuring that funds are available when needed.

Question 2

Firms that wish to improve control over cash disbursements use a voucher system.

Accepted Answer

A voucher system is used to improve control over cash disbursements by requiring documentation and approval of each payment before it is made. This helps to prevent unauthorized or fraudulent disbursements.

Question 3

A purchasing system that employs electronic data interchange does not use a purchase order.

Accepted Answer

A purchasing system that employs electronic data interchange may still use a purchase order, but it would be in electronic format instead of a paper document. The use of electronic data interchange allows for more efficient and accurate transmission of purchase order information between the buyer and seller.

Question 4

Inspection of shipments in the receiving department would be improved if the documentation showed the value of the inventory.

Accepted Answer

Inspection of shipments in the receiving department primarily focuses on verifying the quantity and condition of the goods received, not the value of the inventory.

Question 5

A three way match involves a purchase order,a purchase requisition,and an invoice.

Accepted Answer

A three-way match involves a purchase order, a receiving report, and an invoice to ensure a transaction is accurate before payment is made.

Question 6

If accounts payable receives an invoice directly from the supplier it needs to be reconciled with the purchase order and receiving report.

Accepted Answer

Accounts payable needs to ensure that the invoice matches what was ordered (purchase order) and received (receiving report) before processing payment. This is to verify the accuracy of the invoice and prevent errors or fraud.

Question 7

Supervision in receiving is intended to reduce the theft of assets.

Accepted Answer

Supervision in receiving helps to ensure that all incoming items are properly accounted for, reducing the likelihood of theft or loss.

Question 8

One reason for authorizing purchases is to enable efficient inventory management.

Accepted Answer

Authorizing purchases helps in maintaining efficient inventory management by ensuring that the right quantity and quality of goods are ordered and received in a timely manner. This helps in reducing excess inventory, stockouts, and associated costs.

Question 9

Authorization for a cash disbursement occurs in the cash disbursement department upon receipt of the supplier's invoice.

Accepted Answer

Authorization for a cash disbursement typically occurs in the accounts payable department or a similar financial oversight department, not the cash disbursement department. The cash disbursement department is responsible for processing the payment after it has been authorized.

Question 10

In non-manufacturing firms,purchasing decisions are authorized by inventory control.

Accepted Answer

The answer of In non-manufacturing firms,purchasing decisions are authorized by...

Question 11

The blind copy of the purchase order that goes to the receiving department contains no item descriptions.

Accepted Answer

The answer of The blind copy of the purchase order...

Question 12

The accounts payable department reconciles the accounts payable subsidiary ledger to the control account.

Accepted Answer

The answer of The accounts payable department reconciles the accounts...

Question 13

A major risk exposure in the expenditure cycle is that accounts payable may be overstated at the end of the accounting year.

Accepted Answer

The answer of A major risk exposure in the expenditure...

Question 14

Proper segregation of duties requires that the responsibility approving a payment be separated from posting to the cash disbursements journal.

Accepted Answer

Proper segregation of duties requires that the responsibility for approving a payment be separated from the responsibility for posting to the cash disbursements journal to prevent fraud or error.

Question 15

Inventory control should be located in the warehouse.

Accepted Answer

Inventory control is a broader function that involves managing and overseeing the inventory levels, orders, and stock across various locations, not just limited to the physical space of a warehouse. It often involves coordination between different departments such as purchasing, supply chain, and sales to ensure inventory accuracy and efficiency.

Question 16

Authorization of purchases in a merchandising firm occurs in the inventory control department.

Accepted Answer

The answer of Authorization of purchases in a merchandising firm...

Question 17

When a trading partner agreement is in place,the traditional three way match may be eliminated.

Accepted Answer

When a trading partner agreement is in place, the buyer and supplier agree on the terms of the purchase order and invoice, so there is no need for the traditional three-way match between purchase order, goods receipt, and invoice. The agreement replaces these three steps with a predetermined price and quantity, reducing the time and effort required to complete the transaction.

Question 18

Permitting warehouse staff to maintain the only inventory records violates separation of duties.

Accepted Answer

Separation of duties is a fundamental principle of internal controls. Allowing warehouse staff to maintain the only inventory records creates an opportunity for fraud or errors to occur without being detected by another party. For proper internal control, inventory records should be maintained by a separate group from those handling the physical inventory.

Question 19

In a voucher system,the sum of all unpaid vouchers in the voucher register equals the firm's total voucher payable balance.

Accepted Answer

This statement is true. The voucher register keeps track of all vouchers issued by a firm, and the total sum of all unpaid vouchers in the register should equal the firm's total voucher payable balance. This helps to ensure that the firm does not overpay or underpay its vendors or suppliers.

Question 20

The use of inventory reorder points suggests the need to obtain specific authorization.

Accepted Answer

The use of inventory reorder points does not necessarily suggest the need for specific authorization. Reorder points can be set by inventory managers or automated systems without requiring prior approval. However, some organizations may have specific policies requiring authorization for setting reorder points.

Quiz 10: Auditing the Expenditure Cycle