Test Bank Answers Ch12 Administrative Processes And Controls

ACCOUNTING INFORMATION SYSTEMS/3e

TURNER / WEICKGENANNT/COPELAND

Test Bank: CHAPTER 12: Administrative Processes and Controls

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. Which of the following is NOT part of an administrative process?
2. The sale of stock
3. The sale of bonds
4. The write-off of bad debts
5. The purchase of marketable securities
6. Which of the following statements is NOT regarding source of capital transactions?
7. These processes should not be initiated unless there is specific authorization by management at a top level.
8. Source of capital processes will result in potential dividend or interest payments.
9. Retirement of debt is a source of capital process.
10. The fact that these transactions and processes cannot occur without oversight by top management means other controls are not necessary.
11. The officer within a corporation that usually has oversight responsibility for investment processes is the
12. Controller.
13. Treasurer.
14. Chief executive officer (CEO).
15. Chief accounting officer (CAO).
16. Which of the following statements is regarding internal controls of capital and investment processes?
17. Internal controls aimed at preventing and detecting employee fraud in capital and investment processes are not as effective.
18. Top management fraud, rather than employee fraud, is more likely to occur.
19. Any fraud is likely to involve manipulating capital and investment processes.
20. Because of top management oversight, the auditor need not review these processes.
21. Which of the following statements is ?
22. Routine transactions are recorded in the general journal.
23. Nonroutine transactions are entered in the general journal.
24. Nonroutine transactions are recorded in a subsidiary ledger.
25. Nonroutine transactions are recorded in a special journal.
26. Regarding subsidiary ledgers and general ledger control accounts, which of the following is NOT ?
27. Total balances in a subsidiary ledger should always equal the balance in the corresponding general ledger account.
28. The general ledger maintains details of subaccounts.
29. Control is enhanced by separating the subsidiary ledger from the general ledger.
30. Reconciling a subsidiary ledger to the general ledger can help to detect errors or fraud.
31. Which of the following statements regarding the authorization of general ledger posting is NOT ?
32. Posting to the general ledger always requires specific authorization.
33. User IDs and passwords can serve as authorization to post transactions to the general ledger.
34. A journal voucher serves as authorization for manual systems.
35. As IT systems become more automated, the authorization of general ledger posting is moved to lower levels of employees.
36. In a manual system with proper segregation of duties, an employee in the general ledger department should only
37. Authorize posting to the general ledger.
38. Post transactions to the general ledger.
39. Reconcile the subsidiary ledger to the general ledger.
40. Post transactions to the subsidiary ledger.
41. Which of the following statements about reporting is ?
42. External users need detailed, rather than summarized, information.
43. All reports, internal and external, are derived only from general ledger data.
44. All organizations need similar internal reports.
45. Internal reports are tailored to the specific needs of each management level and function.
46. Which of the following is NOT generally an area of measure in a balanced scorecard?
47. Vendor
48. Customer
49. Financial
50. Learning and growth

TEST BANK – CHAPTER 12 – MULTIPLE CHOICE

1. Capital or investment processes:
2. Is a regular and frequent event.
3. Only requires the specific approval of someone such as a senior accountant.
4. Requires the specific approval of top management or board of directors.
5. Can be considered revenue since it results in cash inflows.
6. Capital or investment processes:
7. Is a regular and frequent event.
8. Do not require established procedures or internal controls due to their infrequency.
9. Require established procedures and internal controls even though they are considered infrequent events.
10. Do not involve the company’s own bond issues.
11. Within the conversion processes, systems and controls result from transactions that are:
12. Large volumes of daily materials transactions.
13. Large volumes of daily sales and cash inflow transactions.
14. Periodic.
15. Infrequent.
16. Within the revenue and return processes, systems and controls result from transactions that are:
17. Large volumes of daily materials transactions.
18. Large volumes of daily sales and cash inflow transactions.
19. Periodic.
20. Infrequent.
21. Within the administrative processes, systems and controls result from transactions that are:
22. Large volumes of daily materials transactions.
23. Large volumes of daily sales and cash inflow transactions.
24. Periodic.
25. Infrequent or intermittent.
26. External reports do not include:
27. Balance sheets.
28. Income statements.
29. Sales reports.
30. Cash flows.
31. Internal reports do not include:
32. Balance sheets.
33. Sales reports.
34. Cash flows.
35. Inventory status reports.
36. Balance sheet, income statement, cash flow statement.
37. Sales, balance sheet, income statement.
38. Balance sheet, income statement, aged receivables.
39. Sales, inventory, aged receivables.
40. Balance sheet, income statement, cash flow statement.
41. Sales, balance sheet, income statement.
42. Balance sheet, income statement, aged receivables.
43. Sales, inventory, aged receivables.
44. Payroll transactions are considered:
45. Large volume daily events.
46. Small volume daily events.
47. Periodic events.
48. Intermittent or infrequent events.
49. Raw material events can be found in which two processes?
50. Revenue and return processes, systems & controls and 2) expenditures and return processes, systems & controls.
51. Expenditures and return processes, systems & controls and 2) conversion processes, systems & controls.
52. Conversion processes, systems & controls and 2) Administrative processes, systems & controls.
53. Administrative processes, systems & controls and 2) Revenue and return processes, systems & controls.
54. Capital is/are the funds:
55. Utilized to acquire long-term and short-term or current assets.
56. Received from customers from accounts receivable.
57. Utilized to acquire long-term assets
58. That are cash inflows regardless of source.
59. The decision to raise or acquire capital funds is:
60. The responsibility of contract stock underwriters.
61. The responsibility of contract bond underwriters.
62. Affects only bonds.
63. Is the responsibility of the board of directors.
64. The processes that authorize the raising of capital, execute the raising of capital, and properly account for that capital are called:
65. Capital raising processes
66. Source of capital processes
67. Administrative processes
68. Investment processes
69. Capital funds are acquired through the issuance of:
70. Bonds only.
71. Stocks and/or bonds.
72. Stocks only.
73. Debt instruments only.
74. Long-term debt results from borrowing funds via:
75. Bonds and loans with payment schedules several years in the future.
76. Stocks.
77. Loans with payment due in the near future.
78. All of the above, A, B, and C, are examples of long-term debt.
79. Equity is considered:
80. Bonds and loans with payment schedules several years in the future.
81. Stocks.
82. Loans with payment due in the near future.
83. All of the above, A, B, and C, are examples of long-term debt.
84. The transactions and resulting processes related to loans, bonds payable, and stock should be executed only when
85. Received funds have been expended through the purchase of fixed assets.
86. The transactions are completed.
87. Top supervisors authorize them
88. Top management or the board of directors authorize them.
89. Select the correct statement from those listed below.
90. Issuance of bonds and the origination of loans are considered debt while the issuance of stock is considered equity.
91. Issuance of bonds and the origination of loans are considered debt while the issuance of stock is considered revenue.
92. Issuance of bonds, the origination of loans, and the issuance of stock are all considered debt.
93. Issuance of bonds, the origination of loans, and the issuance of stock are all considered equity.
94. Items associated with debt do NOT include:
95. Interest.
96. Maturity date.
97. Dividends.
98. Changes in stockholders’ equity.
99. Items associated with equity include all but:
100. Interest.
101. Maturity date.
102. Dividends.
103. Changes in stockholders’ equity.
104. Investment processes:
105. Issue stock.
106. Issue bonds.
107. Purchase of fixed assets.
108. Invest excess funds.
109. Which of the following, within the corporation, has the responsibility for making investment decisions?
110. Board of directors.
111. Chief financial officer.
112. Treasurer.
113. President/CEO.
114. Corporations with complex IT systems:
115. May automate their investment process.
116. Still handle all investment processes manually.
117. Generally isolate the investment process from their accounting application.
118. Cannot forecast surplus cash levels.
119. Select the statement from those given below.
120. Capital processes require top management approval while investment processes only require treasurer approval.
121. Both the capital process and the investment process require only treasurer approval.
122. Both the capital process and the investment process require top management approval.
123. Neither the capital process nor the investment processes require top management approval.
124. Fraud associated with the capital and investment process is:
125. Is generally the actions of the employees handling the cash associated with transactions.
126. Usually related to management fraud.
127. Prevented by the use of electronic funds transfers.
128. Usually not pursued by the Securities and Exchange Commission.
129. The proper sequence of events for the accounting cycle is:
130. Journalize, post, trial balance, adjusting entries, financial statements, and closing entries.
131. Journalize, post, trial balance, adjusting entries, closing entries, and financial statements.
132. Journalize, post, adjusting entries, trial balance, closing entries, and financial statements.
133. Trial balance, adjusting entries, journalize, post, closing entries, and financial statements.
134. The ________ provide(s) details for all the account within the chart of accounts and is the entire set of T-accounts for the organization.
135. Trial balance
136. Adjust entries
137. Financial statements
138. General ledger
139. Special journals include:
140. Accounts receivable journal, cash receipts journal, payroll journal, purchases journal, and sales journal.
141. Accounts payable journal, cash disbursements journal, payroll journal, purchases journal, and sales journal.
142. Cash disbursements journal, cash receipts journal, general journal, payroll journal, purchases journal, and sales journal.
143. Cash disbursements journal, cash receipts journal, payroll journal, purchases journal, and sales journal.
144. Which of the following is NOT a special journal?
145. Sales journal
146. Inventory journal.
147. Cash receipts journal.
148. Payroll journal.
149. Special journals include the:
150. Accounts receivable journal.
151. Accounts payable journal.
152. Purchases journal.
153. Inventory journal.
154. When a transaction occurs in a business, the accountant must decide if it is a regular and recurring transaction. If the transaction IS regular and recurring, it will be recorded in a ____1_____. If it is NOT regular and recurring, it will be recorded in a _____2_____.
155. 1=General journal; 2=Special journal
156. 1=General ledger: 2=Special ledger
157. 1=Special journal; 2=General Journal
158. 1=Special journal; 2=Subsidiary Ledger
159. Select the correct statement from the following.
160. To review purchases from a vendor inspect the purchases journal, to review payments to a vendor inspect the cash receipts journal.
161. To review purchases from a vendor and review payments to a vendor inspect the cash disbursements journal.
162. To review the purchases from a vendor inspect the purchases journal, to determine inventory levels of a specific item inspect the subsidiary ledger for inventory.
163. To review the payments to a vendor inspect the cash receipts journal, to determine inventory levels of a specific item inspect the inventory journal.
164. Select the correct statement from the following:
165. The accounts payable journal will not show detail of purchases from a vendor.
166. Details of amounts owed by a customer in are the accounts payable journal.
167. The sales journal contains all sales information.
168. Details of amounts owed to a vendor are contained in the purchases journal.
169. Select the correct statement from the following:
170. If the trial balance debits equal the trial balance credits, adjusting entries are not necessary.
171. Adjusting entries are made after the adjusted trial balance report is printed.
172. Accounts payable information in detail can be found in both the general ledger and the accounts payable subsidiary ledger.
173. Financial statements must be prepared before the closing entries are journalized.
174. Sales and sales returns can affect which journals?
175. Accounts receivable, accounts payable, inventory, and sales.
176. Accounts receivable, cash, inventory, and sales.
177. Accounts receivable, accounts payable, purchases, and inventory.
178. Sales, cash receipts, cash disbursements, inventory, and purchases.
179. Special journals are:
180. Utilized for infrequent special journal entries.
181. For regular and recurring transactions.
182. Not utilized in automated accounting processes.
183. Often the source of information regarding a specific customer.
184. The sales journal would have columns for a:
185. Debit to sales, a credit to accounts receivable.
186. Debit to cash, a debit to accounts receivable, and a credit to sales.
187. Debit to accounts receivable and a credit to cost of goods sold.
188. Debit to accounts receivable and a credit to sales.
189. Subsidiary ledgers:
190. Would not contain the detailed information of a customer’s account.
191. Would contain the detailed information of a customer’s account.
192. Would contain only information related to secondary interests of the organization.
193. Would not be utilized in automated accounting processes.
194. When special journals are utilized:
195. A general journal is not required.
196. Segregation of duties is required.
197. A general journal is still utilized for infrequent and unique journal entries.
198. A general ledger is not required.
199. Corrections to posting errors are made:
200. Before the first trial balance.
201. Only after the first trial balance.
202. When discovered.
203. Only when directed by top management.
204. Closing entries are:
205. Journalized in all of the special journals.
206. Journalized in the general journal.
207. Journalized in the subsidiary ledgers.
208. Journalized in the general ledger.
209. Closing entries:
210. Close all of the general ledger accounts.
211. End the fiscal period.
212. Close all of the subsidiary ledger accounts.
213. Are journalized in the subsidiary ledgers.
214. Today’s automated accounting process:
215. Is built on a structure independent of manual accounting.
216. Does not require special journals or subsidiary ledgers.
217. Is built on an operational structure similar to manual accounting.
218. Eliminate errors in the accounting process.
219. Today’s automated accounting process:
220. Helps the user by identifying modules for activities.
221. Precludes the use of subsidiary ledgers.
222. Requires manual posting of general journal transactions.
223. All of the above, A, B, and C, are correct.
224. Transactions are recorded in the special journals and subsidiary ledgers:
225. At the time of the transaction.
226. Only when approved by top management.
227. Only during the adjusting process.
228. Only during the closing process.
229. Posting to the general ledger occurs:
230. As the transaction is recorded in the special journals.
231. Is not required if special journals are utilized.
232. Automatically at the end of each business day.
233. Only when proper authorization has been given.
234. In the case of a manual accounting system, wages and payroll deductions would not be posted to the general ledger until the ________ forwards a signed journal voucher, giving the authorization.
235. Accounting manager
236. Controller
237. Payroll department
238. Upper management
239. In automated accounting:
240. Paper vouchers are still required before the posting process is started.
241. Transaction information may be held in a special module awaiting posting.
242. General ledger accounts are updated as transactions are recorded in special journals.
243. Authorization is required for each specific transaction.
244. As computerized accounting systems get more and more complex and integrated:
245. The level of authorization for posting gets higher in the level of responsibilities.
246. The level of authorization for posting has not changed.
247. The level of authorization for posting gets lower in the level of responsibilities.
248. More levels of authorization are required.
249. Which of the following statements is ?
250. As computerized accounting systems become more complex, there are usually fewer manual processes.
251. With more automation in computerized accounting systems, responsibility for authorization gets moved to lower levels of employees.
252. Approvals for each journal voucher are general authorizations instead of a specific authorization.
253. None of the above are
254. Select the correct statement from the following.
255. General ledger employees should not have custody of any assets that they record in the general ledger.
256. General ledger employees should never be given responsibility for authorizing any journal vouchers.
257. General ledger employees should only record journal vouchers that have been authorized by the appropriate manager.
258. All of the above, A, B, and C, are correct.
259. General ledger employees should record journal vouchers, but they should not
260. Have recording responsibility for any special journals or subsidiary ledgers.
261. Authorize journal vouchers.
262. Have custody of assets.
263. All of the above, A, B, and C, are correct.
264. Segregation of duties:
265. Remains unchanged between computerized and manual accounting.
266. May be more difficult in less complex computerized accounting systems.
267. Is not a factor with computerized accounting systems.
268. Is not a factor with manual accounting systems.
269. When transactions are posted in a computerized accounting system:
270. The user must post all transactions awaiting in the module.
271. Segregation of duties is not a factor.
272. The user can select which batches of transactions to post.
273. Anyone with general ledger access can post the transactions.
274. Within ERP systems:
275. A single user with a password may be authorized to purchase and receive the item.
276. Segregation of duties and responsibilities allows incompatible privileges.
277. Purchasing requires a different approval than receiving.
278. User profiles are not recorded within the system.
279. While using a manual general ledger system, the audit trail could consist of:

1. General ledger.

2. Electronic images.

3. Journal vouchers.

4. Paper documents.

5. Source documents.

6. Special journals.

7. Subsidiary ledgers.

1. 1, 2, 3, 4, 5, 6, and 7.
2. 1, 3, 4, 5, 6, and 7.
3. C1, 2, 4, 5, 6, and 7.
4. D1, 2, 4, 6, and 7.
5. To maintain adequate records and documents in a manual general ledger system, there are two important requirements. These are:
6. Well-defined chart of accounts & adequate general ledger
7. Adequate audit trail & adequate internal controls
8. Well-defined chart of accounts & adequate audit trail
9. Adequate general ledger & adequate internal controls
10. While using a computerized IT accounting system, the audit trail could consist of:

1. General ledger.

2. Electronic images.

3. Journal vouchers.

4. Paper documents.

5. Source documents.

6. Special journals.

7. Subsidiary ledgers.

1. 1, 2, 3, 4, 5, 6, and 7.
2. 2.
3. 2, 4, 5, and 7.
4. 1, 4, 6, and 7.
5. Audit trails:
6. Can proceed only from the source document to the journal entry.
7. Can proceed only from the journal entry to the source document.
8. Is only utilized by the CPA auditors.
9. Can be from the source document to the journal entry or from the journal entry to the source document.
10. Security of source documents:
11. Is essential for both manual general ledger systems and IT accounting systems.
12. Is not a factor with IT accounting systems since the source documents are electronic images.
13. Is not a factor with manual general ledger systems since they are printed documents in archive files.
14. None of the options, A, B, or C, are correct.
15. IT controls over computer records and physical controls in general ledger storage areas minimize the related risk of:
16. Fraud and errors
17. Invalid general ledger postings
18. Theft and fraud
19. Amounts posted to wrong accounts
20. By maintaining a well-defined, complete chart of accounts, an organization minimizes the related risk of:
21. Fraud and errors
22. Invalid general ledger postings
23. Theft and fraud
24. Amounts posted to wrong accounts
25. Select the correct statement from those listed below.
26. Investors and creditors use nonfinancial feedback to evaluate business performance.
27. Internal managers need only nonfinancial feedback for proper planning and control of operations.
28. Internal managers need reports at the same frequency as external users.
29. Internal managers need much more frequent and detailed reports than external users.
30. Internal users:

1. Need more frequent reports than external users.

2. Need the same reports as external users to manage the operation.

3. Do not utilize nonfinancial information in the planning and control of operations.

4. Utilize nonfinancial information in the planning and control of operations.

1. Only 1.
2. Only 1 and 4.
3. Only 1 and 2.
4. Only 4.
5. The external general purpose financial statements/reports are the:

1. Aged accounts payable report.

2. Aged accounts receivable report.

3. Balance sheet.

4. Income statement.

5. Inventory statement.

6. Statement of cash flows.

7. Statement of retained earnings.

1. 1, 2, 3, 4, 5, 6, and 7.
2. Only 1, 2, 3, 4, 6, and 7.
3. Only 3, 4, 6, and 7.
4. Only 1, 3, 4, 6, and 7.
5. Financial statements:
6. Are generated from the values of the special journals and subsidiary ledgers.
7. Are presented with complete chart of account detail.
8. May contain condensed data from the general ledger.
9. Show units in inventory and dollar value of those units.
10. The four general purpose financial statements are:
11. Generated at the end of each month.
12. Generated at the end of each fiscal period.
13. Distributed only to external users.
14. Distributed only to internal users.
15. Internal reports of financial information:
16. Are standardized by the AICPA.
17. Are the same as those distributed to the external users.
18. Vary by the user.
19. Are distributed on the same time schedule as external reports.
20. The factor that does NOT affect internal reports is:
21. The type of organization.
22. The audit status of the organization.
23. The underlying function being managed.
24. The time horizon.
25. The account that a manufacturing operation and a retail firm would have in common would be:
26. Raw materials.
27. Work in process.
28. Manufacturing Labor.
29. Inventory.
30. A service firm would focus on:
31. Raw materials and work in process.
32. Sales and project status.
33. Work in process and labor.
34. Raw materials and labor.
35. A common interest for manufacturing, retail, and service firms is:
36. Inventory.
37. Revenues.
38. Profitability.
39. Both B and C.
40. Not-for-profit organizations would be interested in:
41. Cash flows, revenues, and expenditures.
42. Cash flows, funding sources, and expenditures.
43. Revenues, expenses, and funding sources.
44. Cash inflows, cash outflows, and profits.
45. Select the statement from those listed below.
46. Managers only need reports showing dollar values.
47. Managers only need reports showing unit data.
48. All managers need the same information.
49. Managers need the information associated with their area of responsibility.
50. Studies show:
51. That for day-to-day operations unit data is the critical element.
52. That for day-to-day operations general ledger dollar value is the critical element.
53. That the general ledger dollar values have little impact on long-term time horizons.
54. Both A and B are correct.
55. Unethical or fraudulent behavior within the administrative process

1. Can occur in administrative processing of an organization.

2. Can occur in the reporting functions of an organization.

3. Are much more likely to be initiated by management.

4. Are much more likely to be initiated by employees.

1. Only 1, 2, and 3 are correct.
2. Only 1, 2, and 4 are correct.
3. Only 1 and 3 are correct.
4. Only 2 and 4 are correct.
5. Select the statement from the following.
6. Employee fraud is more prevalent in the routine processes. Management fraud is more prevalent in administrative processes and reporting.
7. Employee fraud is less prevalent in the routine processes and administrative processes. Management fraud is more prevalent in operational processes and reporting.
8. Employee fraud is less prevalent in the administrative processes. Management fraud is more prevalent in operational processes and reporting.
9. Employee and managerial fraud is prevalent in the routine processes as well as the administrative processes and reporting equally.
10. In a properly controlled system of administrative and reporting functions,

1. Employees have access to related assets or source documents.

2. Administrative processes are tightly controlled by supervisors.

3. Employees have the authority to initiate processes such as investing.

4. On processes such as sales and cash receipts employees are given general authorization to initiate and process transactions.

1. Only 1 and 4 are
2. Only 1, 2, and 4 are
3. Only 4 is
4. Only 1, 3, and 4 are
5. Examples of employee initiated fraud would NOT include:
6. The writing off uncollectible accounts of a friend even when it could be collected.
7. The inflation of hours worked on time card
8. The theft of cash or checks from the mailroom.
9. The release of or misleading general purpose financial statements.
10. Fraud is:
11. Harder to conceal in the routine events of conversion and sales.
12. Harder to conceal in the administrative processes such as investments because they are nonroutine and the number of transactions varies.
13. Harder to conceal when initiated by top management due to limited access to the records.
14. Precluded by proper internal control processes.
15. The raising of capital:
16. Requires the complete and honest details of the utilization of the funds.
17. Should be supported by correct and factual financial statement values.
18. Should be supported by correct and factual financial statement footnotes.
19. All of the above, A, B, and C, are correct.
20. The four primary functions of corporate governance do not include:
21. Management oversight.
22. Inventory control.
23. Financial stewardship.
24. Ethical conduct.
25. A proper corporate governance structure must be in place in order to properly deter instances of:
26. Fraud.
27. Theft.
28. Misuse or manipulation of administrative resources.
29. All of the above, A, B, and C, are correct.
30. When management designs and implements effective administrative processes:
31. Delegation of responsibility is prohibited.
32. The ability to steal or misuse capital is eliminated.
33. Constant monitoring is necessary.
34. The responsibility of executing related capital functions to employees is prohibited.
35. When management designs and implements effective administrative processes:
36. Delegation of responsibility is prohibited.
37. A budgeting process is a method of corporate governance.
38. The responsibility of executing related capital functions to employees is prohibited.
39. The ability to steal or misuse capital is eliminated.
40. There are a number of increased reporting requirements as the result of Sarbanes-Oxley and IFRS. These requirements have made it imperative for companies to:
41. Adjust the systems and controls
42. Collect additional information needed for compliance.
43. Well organized with the right resources to carry out the new tasks.
44. All of the above are required.
45. When management has designed, implemented, and continually manages processes and internal controls, it is helping to ensure proper ________.
46. Stewardship
47. Ethics
48. Administrative processes
49. Capital processes
50. Good corporate governance depends mainly upon ________.
51. The ethical conduct of management
52. The organization’s profit margin
53. The ethical conduct of low-level employees
54. The internal controls of the organization

TEST BANK – CHAPTER 12 – TRUE /

1. The sale of bonds should be considered a regular, recurring process since these types of transactions are recorded in the general ledger.
2. Administrative processes are transactions and activities that either are specifically authorized by top managers or are used by managers to perform administrative functions.
3. Not all organizations require long-term, capital assets such as land, buildings, and equipment to operate.
4. Capital usually comes from assets or short-term debt.
5. Source of operational processes are those processes to authorize the raising of capital, execute the raising of capital, and to properly account for that capital.
6. The board of directors must decide between debt, assets, or equity for capital funds.
7. An underwriter is a third party that contracts with a corporation to bring new securities issues to the public market.
8. Operations processes authorize, execute, manage, and properly account for debt.
9. A corporation’s own stock that is repurchased by the company on the open market is a marketable security.
10. For both source of capital processes and investment processes, the important control is the specific authorization and oversight by top management.
11. Business processes in an organization do not include events that are accounting transactions.
12. Subsidiary ledgers maintain the detail information regarding routine transactions, with an account established for each entity.
13. Special journals are journals that are established to record the transactions of specific customers and vendors.
14. In the case of a manual accounting system, an approved journal voucher must be forwarded to the general ledger department before transactions can be recorded.
15. Approvals for each journal voucher are specific authorizations.
16. An example of good internal control is having one person responsible for the value of the total of the sales in the sales journal and another person responsible for the balance of sales in the general ledger.
17. General ledger employees should record journal vouchers, but they should not authorize journal vouchers, have custody of assets, or have recording responsibility for any special journals or subsidiary ledgers.
18. A well-defined chart of accounts would contain an account titled “Rent.”
19. Because of their access to the accounting system, internal managers need less detailed reports than external users.
20. External users need detailed balance information on every existing account in the general ledger.
21. Service firm internal reports are more likely to focus on sales and the status of projects.
22. Unethical and fraudulent behaviors are much more likely to be initiated by employees, not management.
23. One of the reasons that management, not employees, initiates more unethical and fraudulent activities is that employees do not have access to much of the documentation needed to affect the event.
24. Employees are more likely to hide or conceal fraudulent activity in the records of fixed assets and capital acquisition events than elsewhere.
25. Reports disseminated to lower level managers are usually used to provide feedback and establish production schedules or sales goals.
26. To set a proper ethical tone, top managements should measure several factors of managerial performance without over-emphasizing profitability or cost cutting.
27. The only method of exercising corporate governance over administrative processes and financial reporting is through the company’s budgeting process.
28. Because of regulatory and auditing issues, good corporate governance does not depend upon the ethical conduct of management.
29. SO6 Characteristics of Administrative Processes

Describe how the administrative processes are different from revenue, expenditure, and conversion processes?

1. SO6 General Ledger Controls and Risks

For each transaction cycle and each type of transaction, there are internal controls that help to minimize certain risk to the company. Using the terminology and framework developed in the text, describe the following for the General Ledger Process.

1. SO 6 General Ledger Processes

The text outlines a number of processes within an accounting system and provides examples from Microsoft Dynamics GP ERP software. ERP software is often broken down into modules where different transactions are completed for different transaction cycles. The following are examples of some of the modules found in Microsoft Dynamics GP software:

1. SO 7 General Ledger Reports

For each report below, indicate whether the report is likely to be for internal or external users (some reports may be both), and whether data would come exclusively from the general ledger.

The reports are: