Exam Prep Ch9 Expenditures Processes And Controls -

ACCOUNTING INFORMATION SYSTEMS/3e

TURNER / WEICKGENANNT/COPELAND

Test Bank: CHAPTER 9: Expenditures Processes and Controls - Purchases

NOTE: All new or adjusted questions are in red. New questions are identified by the letter A as part of the question number; adjusted questions are identified by the letter X as part of the question number.

End of Chapter Questions:

1. Within the purchases processes, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing processes?
2. The invoice
3. The receiving report
4. The purchase order
5. The purchase requisition
6. Personnel who work in the receiving area should complete all of the following processes, except:
7. Counting the goods received
8. Inspecting goods received for damage
9. Preparing a receiving report
10. Preparing an invoice
11. 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?
12. Purchasing
13. Receiving
14. Accounts Payable
15. Shipping
16. One of the most critical controls to prevent theft of inventory purchased is to:
17. Require authorization of the purchase requisition.
18. Segregate inventory custody from inventory record keeping.
19. Compare the purchase order, receiving report, and invoice.
20. Segregate the authorization of purchases from the inventory record keeping.
21. 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?
22. The department that initiated the purchase request.
23. The receiving department.
24. The purchasing department.
25. The accounts payable department.
26. Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchasing transactions?
27. Is an authorized purchase order required before the receiving department can accept a shipment or the accounts payable department can record a voucher?
28. Are prenumbered purchase requisitions used and are they subsequently matched with vendor invoices?
29. Is there a regular reconciliation of the inventory records with the file of unpaid vouchers?
30. Are prenumbered purchase orders, receiving reports, and vouchers used, and are the entire sequences accounted for?
31. Which of the following controls is not normally performed in the accounts payable department?
32. The vendor’s invoice is matched with the related receiving report.
33. Vendor invoices are approved for payment.
34. Asset and expense accounts to be recorded are assigned.
35. Unused purchase orders and receiving reports are accounted for.
36. In a system of proper internal controls, the same employee should not be allowed to:
37. Sign checks and cancel the supporting voucher package.
38. Receive goods and prepare the related receiving report.
39. Prepare voucher packages and sign checks.
40. Initiate purchase requisitions and inspect goods received.

1. The document prepared when purchased items are returned is a(n):
2. Debit memo
3. Invoice
4. Receiving report
5. Shipping notice
6. Within cash disbursements, all of the following should be before a check is prepared, except that:
7. The purchase order, receiving report, and invoice have been matched.
8. The purchased goods have been used.
9. Sufficient cash is available.
10. The invoice discount date or due date is imminent.
11. 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:
12. Cash disbursements.
13. Approved vouchers.
14. Receiving reports.
15. Vendors’ invoices.
16. Within accounts payable, to ensure that each voucher is submitted and paid only once, each invoice approved to be paid should be:
17. Supported by a receiving report.
18. Stamped “paid” by the check signer.
19. Prenumbered and accounted for.
20. Approved for authorized purchases.
21. For proper segregation of duties in cash disbursements, the person who signs checks also:
22. Reviews the monthly bank reconciliation.
23. Returns the checks to accounts payable.
24. Is denied access to the supporting documents.
25. Is responsible for mailing the checks.
26. Which of the following internal controls wold help prevent overpayment to a vendor or duplicate payment to a vendor?
27. Review and cancellation of supporting documents after issuing payment.
28. Requiring the check signer to mail the payment to the vendor
29. Review of the accounts where the expenditure transaction has been recorded
30. Approving the purchase before the goods are ordered from the vendor
31. Which of the following is not an independent verification related to cash disbursements?
32. The cash disbursements journal is reconciled to the general ledger.
33. The stock of unused checks should be adequately secured and controlled.
34. The bank statement is reconciled on a monthly basis.
35. The accounts payable subsidiary ledger is reconciled to the general ledger.
36. Which of the following IT systems is designed to avoid the document matching process and is an “invoiceless” system?
37. Computer-based matching system
38. Electronic data interchange
39. Evaluated receipt settlement
40. Microsoft Dynamics
41. 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?
42. Unauthorized access
43. Invalid data entered by vendors
44. Repudiation of purchase transactions
45. Virus and worm attacks
46. Which of the following is most likely to be effective in deterring fraud by upper level managers?
47. Internal controls
48. An enforced code of ethics
49. Matching documents prior to payment
50. Segregating custody of inventory from inventory record keeping

TEST BANK - CHAPTER 9 - MULTIPLE CHOICE

1. 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:
2. Systems
3. Processes
4. Activities
5. Requisitions
6. Which of the following must a company have in place to capture, record, summarize and report transactions?
7. Systems and processes
8. systems and activities
9. processes and requisitions
10. activities and requisitions
11. 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:
12. General Ledger Systems
13. Integrated Accounting Systems
14. Journal Application Systems
15. Transaction Processing Systems
16. The acquisition of materials and supplies and the related cash disbursements is referred to as:
17. The Procurement Process
18. Systems and Control Process
19. Expenditure and Return Process
20. Conversion Process
21. Which of the following would be referred to as a common carrier?
22. Taxi-cab
23. Trucking company
24. City bus
25. Fire department vehicle
26. The expenditure and return process is similar to the _______ process, except that goods and cash flow in the opposite direction.
27. Procurement
28. Conversion
29. Revenue
30. Systems and control
31. Common expenditure processes would include all of the following, except:
32. Preparation of a purchase requisition
33. Receipt of the goods or services
34. Recording the liability
35. Payment received on account
36. The textbook referred to the three primary categories of processes in the typical purchasing system. Which of the following in not one of those categories?
37. Purchase Processes
38. Cash Disbursement Processes
39. Receiving Processes
40. Purchase Return Processes
41. 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?
42. Recording invalid transactions.
43. Recording transactions at the wrong amounts.
44. Omitting actual transactions from the accounting records.
45. Transactions properly accumulated or transferred to the correct accounting records.
46. Which of the following events would not constitute the start of the purchasing process?
47. A warehouse attendant notices a particularly low stock level.
48. An operations manager becomes aware of additional quantities of material that will be needed to fulfill sales orders.
49. An accountant detects potential shortages in documented inventory quantities.
50. The purchasing manager receives a shipment of raw materials that she had ordered.
51. Which of the following departments is not a part of the purchasing process?
52. Receiving
53. Warehouse
54. Cash Disbursements
55. Accounts Payable
56. All of the following are external reports except:
57. Balance Sheet
58. Income Statement
59. Cash Flows Statement
60. Aged Accounts Receivable Schedule
61. This form is prepared to document the need to make a purchase and requests that the specific items and quantities be purchased.
62. Purchase order
63. Purchase requisition
64. Purchase invoice
65. Purchase journal
66. 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.
67. Purchase order
68. Purchase requisition
69. Purchase invoice

Purchase journal

1. 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.
2. Purchase order
3. Purchase requisition
4. Purchase invoice
5. Purchase journal
6. There are different ways to issue a purchase order to a vendor. Which of the following is not one of the ways?
7. Hard copy via fax or mail
8. Hard copy by hand
9. Electronically via e-mail
10. Directly through the computer network

1. This document, prepared and maintained by the receiving department, is a sequential listing of all receipts.
2. Receiving report
3. Packing slip
4. Bill of lading
5. Receiving log
6. 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.
7. Packing slip
8. Blind purchase order
9. Empty purchase order
10. Receiving report
11. The main reason that receiving clerks are denied access to purchase order quantities and prices is to:
12. Ensure that the receiving clerk actually takes the time to verify the accuracy of a delivery before accepting it.
13. Prevent the receiving clerk from stealing delivered goods and manipulating the quantities and prices of received goods.
14. Prevent fraudulent collusion between the common carrier and the receiving clerk.
15. N/A – the receiving clerk is NOT denied access to purchase order quantities and prices.
16. Which department maintains copies of purchase orders and receiving reports so that the documents can be compared before the accounting records are updated?
17. Receiving
18. Accounts Payable
19. Cash Disbursements
20. Warehouse
21. 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.
22. Packing slip
23. Receiving report
24. Bill of lading
25. Purchase order
26. Immediate preparation of receiving reports for all actual receipts of goods helps to minimize the risk of:
27. Timing issues
28. Omitted transactions
29. Invalid purchases
30. All of the above
31. This document, prepared by the vendor, is intended to show the quantities and descriptions of items included in the shipment.
32. Packing slip
33. Sales invoice
34. Bill of lading
35. Purchase order
36. 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):
37. Obligation referral
38. Cutoff issue
39. Liability deferral
40. Channel stuffing
41. The date that is the end of the accounting period is referred to as the:
42. Fiscal date
43. Change off
44. Accounting cut
45. Cutoff
46. The accounting record that includes the details of amounts owed to each vendor is called the:
47. Accounts payable subsidiary ledger
48. Purchases journal
49. Accounts receivable subsidiary ledger
50. Receiving log
51. The internal control activities within the purchasing process, related to authorization of transactions, would include which of the following?
52. The accounting duties related to requisitioning, ordering, and receiving goods should be performed by different individuals.
53. The custody of inventory and the recording of inventory transactions are required to be maintained.
54. 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.
55. Periodic physical inventory counts are to be reconciled with the inventory ledger and general ledger.
56. Internal control activities within the purchasing process, identified as segregation of duties, would include all of the following, except:
57. Responsibility for authorization, custody, and record keeping are to be assigned to different individuals.
58. Duties related to requisitioning, ordering, purchase approval, receiving, inventory control, accounts payable, and general accounting are to be delegated to separate departments or individuals.
59. Complete separation of inventory custody from inventory accounting.
60. Purchasing records and programs must be protected from unauthorized access.
61. Internal control activities within the purchasing process, identified as adequate records and documents, would include which of the following?
62. Files are to be maintained for purchase requisitions, purchase orders, receiving reports, and invoices.
63. Periodic physical inventory counts are to be reconciled with the inventory ledger.
64. Companies are to implement controls where the corresponding benefit exceeds the related cost.
65. Avoid having the same individuals who handle the inventory also have access to the related accounting records.
66. 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:
67. Goods received are especially difficult to differentiate, count, or inspect.
68. High volumes of goods are often received, or the goods are of high value.
69. Receiving and / or record keeping are performed at one centralized location.
70. Changes in price or vendors is frequent.
71. 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:
72. Invalid vendors
73. Omitted purchases
74. Fictitious purchases
75. Timing issues
76. The internal control process of separating the custody of inventory from the accounts payable record keeping will help to minimize the risk of:
77. Fictitious purchases
78. Invalid vendors
79. Duplicate purchases
80. Incorrect amounts
81. 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:
82. Incorrect posting
83. Omitted purchases
84. Invalid vendors
85. Stolen goods
86. 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:
87. Stolen goods
88. Omitted transactions
89. Invalid purchases
90. Incorrect accumulation
91. 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:
92. Timing issues
93. Omitted purchases
94. Duplicate purchases
95. Stolen goods
96. A company may reject goods received due to a number of reasons. The process related to this is referred to as:
97. Purchases
98. Purchase Returns
99. Accounts Payable
100. Receiving
101. Goods received are unacceptable due to may different situations. Which of the following is not one of those situations?
102. Damage or defects
103. Changes in the company needs regarding future sales or production
104. Errors in the type of goods delivered or ordered
105. Timing issues
106. The last event to occur in the purchase return process is:
107. Update general ledger
108. Return goods to vendor
109. Authorization to return goods
110. Update inventory records
111. Which of the following is the correct chronological order of events in the purchase return process?
112. 1 = receive return authorization; 2 = prepare debit memo; 3 = receive credit or check; 4 = goods returned
113. 1 = prepare debit memo; 2 = receive credit or check; 3 = goods returned; 4 = receive return authorization
114. 1 = receive return authorization; 2 = prepare debit memo; 3 = goods returned; 4 = receive credit or check
115. 1 = receive return authorization; 2 = goods returned ; 3 = prepare debit memo; 4 = receive credit or check
116. The document that identifies the items being returned, along with the relevant information regarding the vendor, quantity and price, is called:
117. Credit memo
118. Receiving report
119. Purchase requisition
120. Debit memo
121. Internal controls related to the purchase returns would include all of the following, except:
122. The accounts payable employee who prepares the debit memo should also be responsible for handling the inventory and approving the return.
123. Special authorization should be required to officially reject and return the items.
124. Debit memos should be issued on pre-numbered forms in numerical sequence.
125. Accounts payable records and data files should be restricted to those who are specifically authorized to approve or record the related purchase return.
126. 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:
127. Fictitious returns
128. Omitted returns
129. Invalid returns
130. Wrong vendor
131. 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:
132. Incorrect amounts
133. Fictitious returns
134. Timing issues
135. Duplicate returns
136. 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:
137. Invalid returns
138. Stolen goods
139. Wrong account numbers
140. Omitted returns
141. 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:
142. Incorrect amounts
143. Omitted returns
144. Fictitious returns
145. Invalid vendors
146. The internal control process that requires physical controls in the warehouse and shipping areas with access to inventory helps to minimize the risk of:
147. Incorrect amounts
148. Stolen goods
149. Omitted returns
150. Duplicate purchase returns
151. 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:
152. Cash disbursements
153. Cash management
154. Independent checks
155. Accounts payable management
156. Which department is generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts?
157. Accounting department
158. Purchasing department
159. Accounts payable department
160. Shipping department
161. 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?
162. Vendor account reconciliation
163. Maintenance of the general ledger
164. Cash management techniques
165. Payment authorization
166. 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?
167. Purchase requisition, purchase order, and receiving report.
168. Purchase order, receiving log, and invoice.
169. Purchase requisition, receiving report, and statement.
170. Purchase order, receiving report, and invoice.
171. 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:
172. Avoid late payment fees
173. Maintain relationships with customers
174. To take advantage of discounts for early payment
175. To stay on good terms with its vendors
176. A tear-off part of a check that has a simple explanation of the reasons for the payment is called:
177. Remittance advice
178. Disbursement journal
179. Transaction description
180. Cash register
181. 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:
182. Marking the invoice
183. Retiring the invoice
184. Cancelling the invoice
185. Destroying the invoice
186. A chronological listing of all payments is referred to as a(n):
187. Remittance Advice
188. Cash Disbursements Journal
189. Accounts Payable Ledger
190. Purchases Journal
191. 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.
192. Double Remittance
193. Duo-Authorization
194. Bi-Sign
195. Dual Signature
196. The security of assets and documents related to cash disbursements would include all of the following, except:
197. Access to cash should be limited to the authorized check signers.
198. Physical controls should be in place where the cash is retained and disbursed.
199. Access to records should be limited to persons with the authority to sign checks.
200. The company’s stock of unused checks should be protected and controlled.
201. Which of the following statements regarding the maintenance of adequate records and documentation in the cash disbursement process is NOT ?
202. An accounts payable subsidiary ledger and a cash disbursement journal are fundamental records in the cash disbursement process.
203. The practice of issuing checks on prenumbered forms creates a record of the sequence of transactions.
204. The orderly maintenance of accounts payable records facilitates effective cash management techniques.
205. Physical controls should be in place in the areas where cash is retained and disbursed.
206. 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:
207. Fictitious payments
208. Invalid payments
209. Timing issues
210. Stolen cash
211. The internal control process that requires that the bank reconciliation be performed monthly, will help to minimize the risk of:
212. Invalid payments
213. Invalid vendors
214. Incorrect posting
215. Duplicate payments
216. The matching of a purchase order to the related receiving report and invoice is known as:
217. Three-way match
218. Document matching
219. Automated matching
220. Disbursement authorization
221. A computer software technique in which the computer software matches a Purchase Order to its related receiving report and invoice is called a(n):
222. Three way matching
223. Document matching
224. Disbursement approval
225. Automated matching
226. Advantages of an automated system includes all of the following, except:
227. Reduce time, costs, errors, and duplicate payments.
228. Increased cost of the system.
229. Provides management more timely information to forecast future cash outflows for payment of invoices.
230. Summarized detailed transactions into summary amounts that are posted to the general ledger accounts.
231. The security and confidentiality risks of computer based matching would include:
232. Unauthorized access to the system’s ordering and matching functions would allow the insertion of fictitious vendors and / or invoices.
233. Errors in system logic can cause systematic and repetitive errors in matching.
234. The criteria used to identify duplicate payments may be too tightly defined and will overlook duplicate payments.
235. System breakdowns or interruptions can stop or slow the processing of invoices and payments.
236. This type of system matching takes place without invoices. The receipt of goods is carefully evaluated an, if it matches the purchase order, settlement of the obligation occurs through the system.
237. Business Process Engineering
238. Controlled Access Invoicing
239. Evaluated Receipt Settlement
240. Double Matching System
241. In order to help safeguard the security and confidentiality in an electronic business environment, a company should implement controls such as user ID, password, log-in procedures, access levels, and authority tables in order to reduce the risk of:
242. Unauthorized access
243. Incomplete audit trail
244. Virus and worm attacks
245. Repudiation of purchase transactions
246. In order to help safeguard the processing integrity in an electronic business environment, a company should implement input controls such as field check, validity check, limit check, reasonableness check, and computer logs in order to reduce the risk of:
247. Worm attacks
248. Hackers
249. Unauthorized access
250. Invalid data entry
251. In order to help safeguard the availability in an electronic business environment, a company should implement controls such as business continuity planning, backup data and systems, in order to reduce the risk of:
252. Unauthorized access
253. System failures
254. Repudiation of purchase transactions
255. Invalid data entry
256. The examination of the system to determine the adequacy of security measures and to identify security deficiencies is called:
257. Intrusion detection
258. Penetration testing
259. Vulnerability testing
260. Integrity testing
261. Intentionally attempting to circumvent IT system access controls to determine whether there are weaknesses in any controls is called:
262. Penetration testing
263. Intrusion detection
264. Integrity testing
265. Vulnerability testing
266. This type of software alerts the organization to hacking or other unauthorized use of the system or network.
267. Penetration testing
268. Intrusion detection
269. Integrity testing
270. Vulnerability testing
271. One of the newest technologies related to payables is one where invoices are exchanged and payments are made via the internet. The name given to this process is:
272. Random Array of Invoice and Disbursements (RAID)
273. Electronic Invoice Payment Procedures (EIPP)
274. Electronic Invoice Presentment and Payment (EIPP)
275. Routing Application Invoice Delivery (RAID)
276. Credit cards given to employees by the organization in order for the employees to make designated purchases are called:
277. Employee Debit Cards
278. Organization Purchase Cards
279. Expenditure Cards
280. Procurement Cards
281. Which of the following groups has an ethical obligation to establish the proper tone at the top, strong internal controls, and high ethical standards?
282. Stockholders
283. Board of Directors and Management
284. Employees
285. Audit Committee
286. There are four primary functions of corporate governance. Which of the following is NOT one of those functions?
287. Availability
288. Management Oversight
289. Internal Controls and Compliance
290. Financial Stewardship

TEST BANK - CHAPTER 9 - TRUE /

1. When the company is a vendor, goods flow into the company and cash is paid out.
2. Companies in the same line of business are not likely to have many differences in their purchasing habits.
3. The purchasing process starts when the purchase invoice is submitted by the vendor.
4. A purchase order is essentially an internal document, one that does not go outside the company, whereas a purchase requisition is an external document, which will be presented to an entity outside the company.
5. A purchase requisition is essentially an internal document, one that does not go outside the company, whereas a purchase order is an external document, which will be presented to an entity outside the company.
6. The use of a blind purchase order forces the receiving clerk to perform an independent check of the quantity and quality of the delivery.
7. A company is not obligated to pay for goods until 30 days after the goods are received.
8. Even though a company has an obligation to pay for goods as soon as the goods are received, it is common to not record the actual liability until the invoice is received.
9. It is necessary for the purchasing department to set up the proper procedures to avoid problems related to cutoff issues.
10. The accounts payable department keeps copies of purchase orders and receiving reports, that will be compared to the related invoice, to be sure that the invoices represent goods that were ordered and received.
11. The accounting department is responsible for implementing internal controls over each business process.
12. Independent reconciliation of the accounts payable subsidiary ledger to the general ledger control account will help to assure that all inventory has been properly recorded.
13. Independent reconciliation of the periodic inventory counts and the inventory ledger and the general ledger will help to assure that inventory is being properly accounted for.
14. For a number of different reasons, a company may find it necessary to reject goods received which will start the purchase returns process.
15. The cash disbursement process must be designed to ensure that the company appropriately records all accounts payable transactions.
16. Most companies conduct business transactions with checks so that a written record is established for cash disbursements.
17. Copies of invoices should be filed in the account in alphabetic order by name of the vendors.
18. When an invoice is paid, it should be canceled to indicate that it has been paid.
19. When preparing the cash disbursement journals, it is important that the records have the actual date of cash disbursement, as is shown on the check.
20. Cash should be periodically verified by comparing the balance in the check book with the balance in the cash account in the general ledger.
21. Cash should be periodically verified by comparing the cash balance with the bank statement.
22. Only the purchasing department should authorize the processing of a cash disbursement transaction.
23. The authorization of a cash disbursement occurs when the accounts payable department matches the purchase order, receiving report, and the invoice, and then forwards the matched documents to the cash disbursements department.
24. Designated members of management should be given the responsibility for authorizing the actual payments and sign their signatures on the face of the check.
25. If the purchasing, receiving, accounts payable, and cash disbursements processes are completed by the same individuals, the internal controls will be stronger because someone in the company will have an overall view of company activities.
26. In order to institute an automated matching system, all of the relevant files must exist in the same physical room.
27. When an automated matching system is used, all of the relevant files must be online (or in databases). The system can then access the online purchase order and receiving files and check the match of items, quantities, and prices.
28. A user who logs in to the computer-based accounting system to enter invoices should also have access to the portion of the system that would allow her / him to order goods.
29. Computer logs should be maintained in order to have a complete record of who used the system and the histories of that use. This computer log would allow monitoring and identification of unauthorized accesses or uses.
30. When a company implements an evaluated receipt settlement results in the increase in the strength of the internal controls.
31. Because the evaluated receipts settlement process relies heavily on an IT system that can quickly access online purchase-order files, a system slowdown could halt all receiving activity.
32. E-business and EDI have much different advantages and risks to the vendor than what exists for the customer.
33. Redundancy is needed for servers, data, and networks.
34. It is likely that expenditure fraud and ethics violations could be eliminated by a strong, ethical “tone at the top” along with encouragement of ethical behavior by all employees, and strong internal controls.
35. Corporate governance policies and procedures must be in place to assure that funds are expended only to the benefit the organization and its owners.
36. It is necessary that managers remember that they are stewards of funds expended by a business - that the funds are not owned by the managers.

1. Strong corporate governance will prevent fraud, theft, and mismanagement within the expenditure process.
2. SO 2 Risk in the Purchasing Process

Certain factors in a company’s purchasing processes result in an increase risk in the organization. Identify and explain four scenarios that increase a company’s risk in the purchasing process.

1.

2.

3.

4.

1. SO 2,34 Internal Controls and Reducing Risks

Identify an internal control procedure that would reduce the following risks in a manual system:

1. SO 2,34 Internal Controls and Reducing Risks

For each internal control procedure provided, identify the risk that the procedure is designed to minimize.