Deck 9: Expenditures Processes and Controlspurchases

Question 1

A manager suspects that certain employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise.When vendors' 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)Vendors' invoices

Answer 1

A

Question 2

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

Answer 2

C

Question 3

Which of the following internal controls wold 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 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

Answer 3

A

Question 4

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

Question 5

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)Initiate purchase requisitions and inspect goods received

Question 6

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 approved for payment.
C)Asset and expense accounts to be recorded are assigned.
D)Unused purchase orders and receiving reports are accounted for.

Question 7

The policies and procedures that employees follow when completing the purchase of goods or materials, capturing vendor data and purchase quantities, and routing the resulting purchasing documents to the proper departments within the company are called:

A)Systems
B)Processes
C)Activities
D)Requisitions

Question 8

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 purchase order, receiving report, and invoice
D)Segregate the authorization of purchases from the inventory record keeping

Question 9

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

Question 10

Which of the following IT systems is designed to avoid the document matching process and is an "invoiceless" system?

A)Computer-based matching system
B)Electronic data interchange
C)Evaluated receipt settlement
D)Micro

Question 11

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

Question 12

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 record keeping

Question 13

Input controls such as field check, validity check, limit check, and reasonableness check are useful in IT systems of purchase 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

Question 14

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchasing transactions?

A)Is an authorized purchase order 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 purchase orders, receiving reports, and vouchers used, and are the entire sequences accounted for?

Question 15

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.

Question 16

The document prepared when purchased items are returned is a(n):

A)Debit memo
B)Invoice
C)Receiving report
D)Shipping notice

Question 17

Within cash disbursements, all of the following should be true before a check is prepared, except that:

A)The purchase order, 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.

Question 18

Which of the following must a company have in place to capture, record, summarize, and report transactions?

A)Systems and processes
B)Systems and activities
C)Processes and requisitions
D)Activities and requisitions

Question 19

Within the purchases 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

Question 20

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

Question 21

Which of the following departments is not a part of the purchasing process?

A)Receiving
B)Warehouse
C)Cash Disbursements
D)Accounts Payable

Question 22

This form is prepared to document the need to make a purchase and requests that the specific items and quantities be purchased.

A)Purchase order
B)Purchase requisition
C)Purchase invoice
D)Purchase journal

Question 23

The expenditure and return process is similar to the _______ process, except that goods and cash flow in the opposite direction.

A)Procurement
B)Conversion
C)Revenue
D)Systems and control

Question 24

All of the following are external reports except:

A)Balance Sheet
B)Income Statement
C)Cash Flows Statement
D)Aged Accounts Receivable Schedule

Question 25

This document, prepared by the vendor, provides details of the items included in the delivery and is normally signed by the receiving clerk as verification of receipt.

A)Packing slip
B)Receiving report
C)Bill of lading
D)Purchase order

Question 26

This document, prepared and maintained by the receiving department, is a sequential listing of all receipts.

A)Receiving report
B)Packing slip
C)Bill of lading
D)Receiving log

Question 27

Which of the following events would not constitute the start of the purchasing process?

A)A warehouse attendant notices a particularly low stock level.
B)An operations manager becomes aware of additional quantities of material that will be needed to fulfill sales orders.
C)An accountant detects potential shortages in documented inventory quantities.
D)The purchasing manager receives a shipment of raw materials that she had ordered.

Question 28

Common expenditure processes would include all of the following, except:

A)Preparation of a purchase requisition
B)Receipt of the goods or services
C)Recording the liability
D)Payment received on account

Question 29

The acquisition of materials and supplies and the related cash disbursements is referred to as:

A)The Procurement Process
B)Systems and Control Process
C)Expenditure and Return Process
D)Conversion Process

Question 30

This form is issued by the buyer, and presented to the seller, to indicate the details for products or services that the seller will provide to the buyer.Information included on this form would be: products, quantities, and agreed-upon prices.

A)Purchase order
B)Purchase requisition
C)Purchase invoice
D)Purchase journal

Question 31

The information from a purchase must flow into the purchase recording systems, the accounts payable and cash disbursement systems, and the inventory tracking systems.In an IT accounting system, these recording and processing systems are called:

A)General Ledger Systems
B)Integrated Accounting Systems
C)Journal Application Systems
D)Transaction Processing Systems

Question 32

Which of the following would be referred to as a common carrier?

A)Taxi-cab
B)Trucking company
C)City bus
D)Fire department vehicle

Question 33

Immediate preparation of receiving reports for all actual receipts of goods helps to minimize the risk of:

A)Timing issues
B)Omitted transactions
C)Invalid purchases
D)All of the above

Question 34

There are different ways to issue a purchase order to a vendor.Which of the following is not one of the ways?

A)Hard copy via fax or mail
B)Hard copy by hand
C)Electronically via e-mail
D)Directly through the computer network

Question 35

The main reason that receiving clerks are denied access to purchase order quantities and prices is to:

A)Ensure that the receiving clerk actually takes the time to verify the accuracy of a delivery before accepting it
B)Prevent the receiving clerk from stealing delivered goods and manipulating the quantities and prices of received goods
C)Prevent fraudulent collusion between the common carrier and the receiving clerk
D)N/A: the receiving clerk is NOT denied access to purchase order quantities and prices

Question 36

A record keeping tool used to record purchases in a manual accounting system.This "tool" would consist of recording all of the purchased orders issued to vendors in a chronological order.

A)Purchase order
B)Purchase requisition
C)Purchase invoice
D)Purchase journal

Question 37

The textbook referred to the three primary categories of processes in the typical purchasing system.Which of the following is not one of those categories?

A)Purchase Processes
B)Cash Disbursement Processes
C)Receiving Processes
D)Purchase Return Processes

Question 38

This document, prepared by the purchasing department, for use by the receiving department, is copy of the purchase order that eliminates all data about the price and quantity of the items ordered.

A)Packing slip
B)Blind purchase order
C)Empty purchase order
D)Receiving report

Question 39

Each category of processes in the typical purchasing system would include controls and risks.For each of the categories, the goal of the internal controls system is to reduce specific types of business risks.Which of the following is not one of those risks?

A)Recording invalid transactions
B)Recording transactions at the wrong amounts
C)Omitting actual transactions from the accounting records
D)Transactions properly accumulated or transferred to the correct accounting records

Question 40

Which department maintains copies of purchase orders and receiving reports so that the documents can be compared before the accounting records are updated?

A)Receiving
B)Accounts Payable
C)Cash Disbursements
D)Warehouse

Question 41

The monthly review and reconciliation of vendor statements and accounts payable records minimizes the risk of all of the following except

A)ommitted or fictitious returns
B)recording an invoice with an incorrect vendor
C)timing issues
D)invoices from a fictitious vendor

Question 42

The internal control activities within the purchasing process, related to authorization of transactions, would include which of the following?

A)The accounting duties related to requisitioning, ordering, and receiving goods should be performed by different individuals.
B)The custody of inventory and the recording of inventory transactions are required to be maintained.
C)Specific individuals should be given authoritative responsibility for preparing purchase requisitions and purchase orders which would include which items to purchase, how many items, and which vendor.
D)Periodic physical inventory counts are to be reconciled with the inventory ledger and general ledger.

Question 43

The internal control process of requiring physical controls in the warehouse and receiving areas, in order to limit access to inventory items, will help to minimize the risk of:

A)Incorrect posting
B)Omitted purchases
C)Invalid vendors
D)Stolen goods

Question 44

When goods are received at the end of the accounting period, and the invoice is not received until after the start of the following period, a problem may arise as to when to record the liability.This is referred to as a(n):

A)Obligation referral
B)Cutoff issue
C)Liability deferral
D)Channel stuffing

Question 45

A company may reject goods received due to a number of reasons.The process related to this is referred to as:

A)Purchases
B)Purchase Returns
C)Accounts Payable
D)Receiving

Question 46

Internal control activities within the purchasing process, identified as adequate records and documents, would include which of the following?

A)Files are to be maintained for purchase requisitions, purchase orders, receiving reports, and invoices.
B)Periodic physical inventory counts are to be reconciled with the inventory ledger.
C)Companies are to implement controls where the corresponding benefit exceeds the related cost.
D)Avoid having the same individuals who handle the inventory al

Question 47

The document that identifies the items being returned, along with the relevant information regarding the vendor, quantity and price, is called:

A)Credit memo
B)Receiving report
C)Purchase requisition
D)Debit memo

Question 48

The internal control process of separating the custody of inventory from the accounts payable record keeping will help to minimize the risk of:

A)Fictitious purchases
B)Invalid vendors
C)Duplicate purchases
D)Incorrect amounts

Question 49

The internal control process that requires the performance of end of period review to determine whether purchases are recorded in the proper period will help to minimize the risk of all of the following EXCEPT:

A)Timing issues
B)Omitted purchases
C)Duplicate purchases
D)Stolen goods

Question 50

The internal control process that requires the approval of the purchase return transaction take place before the preparation of the debit memo, will help to minimize the risk of:

A)Fictitious returns
B)Omitted returns
C)Invalid returns
D)Wrong vendor

Question 51

The date that is the end of the accounting period is referred to as the:

A)Fiscal date
B)Change off
C)Accounting cut
D)Cutoff

Question 52

Which of the following is the correct chronological order of events in the purchase return process?

A)1 = receive return authorization; 2 = prepare debit memo; 3 = receive credit or check; 4 = goods returned
B)1 = prepare debit memo; 2 = receive credit or check; 3 = goods returned; 4 = receive return authorization
C)1 = receive return authorization; 2 = prepare debit memo; 3 = goods returned; 4 = receive credit or check
D)1 = receive return authorization; 2 = goods returned ; 3 = prepare debit memo; 4 = receive credit or check

Question 53

Goods received are unacceptable due to may different situations.Which of the following is not one of those situations?

A)Damage or defects
B)Changes in the company needs regarding future sales or production
C)Errors in the type of goods delivered or ordered
D)Timing issues

Question 54

The internal control process of having the receiving reports prepared on pre-numbered forms so that the sequence of receipts can be reviewed for proper recording will help to minimize the related risk of:

A)Invalid vendors
B)Omitted purchases
C)Fictitious purchases
D)Timing issues

Question 55

A company should study risks common to its system prior to deciding the mix of controls needed.High-risk characteristics that might justify the need for extensive internal controls include all of the following, except:

A)Goods received are especially difficult to differentiate, count, or inspect.
B)High volumes of goods are often received, or the goods are of high value.
C)Receiving and/or record keeping are performed at one centralized location.
D)Changes in price or vendors are frequent.

Question 56

Internal controls related to the purchase returns would include all of the following, except:

A)The accounts payable employee who prepares the debit memo should al
B)Special authorization should be required to officially reject and return the items.
C)Debit memos should be issued on pre-numbered forms in numerical sequence.
D)Accounts payable records and data files should be restricted to those who are specifically authorized to approve or record the related purchase return.

Question 57

This document, prepared by the vendor, is intended to show the quantities and descriptions of items included in the shipment.

A)Packing slip
B)Sales invoice
C)Bill of lading
D)Purchase order

Question 58

The internal control process that requires purchase records to be matched and verified for item descriptions, quantities, dates, authorized prices, and mathematical accuracy, will help to minimize the risk of:

A)Stolen goods
B)Omitted transactions
C)Invalid purchases
D)Incorrect accumulation

Question 59

Internal control activities within the purchasing process, identified as segregation of duties, would include all of the following, except:

A)Responsibility for authorization, custody, and record keeping are to be assigned to different individuals.
B)Duties related to requisitioning, ordering, purchase approval, receiving, inventory control, accounts payable, and general accounting are to be delegated to separate departments or individuals.
C)Complete separation of inventory custody from inventory accounting.
D)Purchasing records and programs must be protected from unauthorized access.

Question 60

The accounting record that includes the details of amounts owed to each vendor is called the:

A)Accounts payable subsidiary ledger
B)Purchases journal
C)Accounts receivable subsidiary ledger
D)Receiving log

Question 61

The internal control process that requires purchase return records be matched with the original purchase documentation and verified for item descriptions, quantities, dates, and prices, will help to minimize the risk of:

A)Incorrect amounts
B)Omitted returns
C)Fictitious returns
D)Invalid vendors

Question 62

The internal control process that requires the approval of a cash disbursement transaction to take place prior to the preparation of the check, will help to minimize the risk of:

A)Fictitious payments
B)Invalid payments
C)Timing issues
D)Stolen cash

Question 63

When a payment has been made, the cash disbursements clerk will clearly mark the invoice with information pertaining to the date and the check number used to satisfy the obligation.This process is called:

A)Marking the invoice
B)Retiring the invoice
C)Cancelling the invoice
D)Destroying the invoice

Question 64

Which department is generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts?

A)Accounting department
B)Purchasing department
C)Accounts payable department
D)Shipping department

Question 65

The internal control process that requires the segregation of the authorization of purchase returns and the accounts payable record keeping and the custody of inventory, will help to minimize the risk of:

A)Incorrect amounts
B)Fictitious returns
C)Timing issues
D)Duplicate returns

Question 66

The careful oversight of cash balances, forecasted cash payments, and forecasted cash receipts to insure that adequate cash balances exist to meet obligations is called:

A)Cash disbursements
B)Cash management
C)Independent checks
D)Accounts payable management

Question 67

This control requires the approval and signature of two authorized persons, on checks over the predetermined threshold amount, which reduces the risk of significant fraud or error.

A)Double Remittance
B)Duo-Authorization
C)Bi-Sign
D)Dual Signature

Question 68

It is important that documentation support or agree with an invoice before payment is approved and a check is issued.Which documents should be matched to make sure that the invoice received relates to a valid order that was placed and that the goods were received?

A)Purchase requisition, purchase order, and receiving report
B)Purchase order, receiving log, and invoice
C)Purchase requisition, receiving report, and statement
D)Purchase order, receiving report, and invoice

Question 69

Within the cash disbursement process, specific steps should be taken to enhance the effectiveness and efficiency of making payments to vendors.Which of the following is NOT one of those steps?

A)Vendor account reconciliation
B)Maintenance of the general ledger
C)Cash management techniques
D)Payment authorization

Question 70

The matching of a purchase order to the related receiving report and invoice is known as:

A)Three-way match
B)Document matching
C)Automated matching
D)Disbursement authorization

Question 71

Which of the following statements regarding the maintenance of adequate records and documentation in the cash disbursement process is NOT true?

A)An accounts payable subsidiary ledger and a cash disbursement journal are fundamental records in the cash disbursement process.
B)The practice of issuing checks on prenumbered forms creates a record of the sequence of transactions.
C)The orderly maintenance of accounts payable records facilitates effective cash management techniques.
D)Physical controls should be in place in the areas where cash is retained and disbursed.

Question 72

It is necessary for a company to maintain good control over their accounts payable and paying by the due date, for all of the following reasons, except:

A)Avoid late payment fees
B)Maintain relationships with customers
C)To take advantage of discounts for early payment
D)To stay on good terms with its vendors

Question 73

The security of assets and documents related to cash disbursements would include all of the following, except:

A)Access to cash should be limited to the authorized check signers.
B)Physical controls should be in place where the cash is retained and disbursed.
C)Access to records should be limited to per
D)The company's stock of unused checks should be protected and controlled.

Question 74

A chronological listing of all payments is referred to as a(n):

A)Remittance Advice
B)Cash Disbursements Journal
C)Accounts Payable Ledger
D)Purchases Journal

Question 75

The internal control process that requires that the bank reconciliation be performed monthly, will help to minimize the risk of:

A)Invalid payments
B)Invalid vendors
C)Incorrect posting
D)Duplicate payments

Question 76

The internal control process that requires physical controls in the warehouse and shipping areas with access to inventory helps to minimize the risk of:

A)Incorrect amounts
B)Stolen goods
C)Omitted returns
D)Duplicate purchase returns

Question 77

A computer software technique in which the computer software matches a Purchase Order to its related receiving report and invoice is called a(n):

A)Three way matching
B)Document matching
C)Disbursement approval
D)Automated matching

Question 78

The internal control process that requires vendor statements to be reviewed monthly and reconciled with accounts payable records, will help to minimize the risk of:

A)Invalid returns
B)Stolen goods
C)Wrong account numbers
D)Omitted returns

Question 79

A tear-off part of a check that has a simple explanation of the reasons for the payment is called:

A)Remittance advice
B)Disbursement journal
C)Transaction description
D)Cash register

Question 80

Advantages of an automated system includes all of the following, except:

A)Reduce time, costs, errors, and duplicate payments
B)Increased cost of the system
C)Provides management more timely information to forecast future cash outflows for payment of invoices
D)Summarized detailed transactions into summary amounts that are posted to the general ledger accounts