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Practice Multiple Choice Questions for Payroll, Sales and Collections, Acquisitions and Payment Processes 1. The internal auditor is reviewin shippin procedures of a manufacturin company. The auditor should !e reatly concerned when a. merchandise is shipped without an approved customer s order. b. invoiced prices on merchandise are not chec#ed !efore the orders are shipped. c. the sales department is not promptly notified when merchandise is shipped. d. only one quotation on transportation co
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  Practice Multiple Choice Questions for Payroll, Sales and Collections, Acquisitions and Payment Processes1.The internal auditor is reviewin shippin procedures of a manufacturin company. The auditor should !e reatly concerned when a. merchandise is shipped without an approved customer s order. b. invoiced prices on merchandise are not chec#ed !efore the orders are shipped. c. the sales department is not promptly notified when merchandise is shipped. d. only one quotation on transportation costs is o!tained. e. transportation tariffs are not chec#ed !efore merchandise is shipped.$.%hich of the followin is an effective internal accountin control over accounts receiva!le&a.'nly people who handle cash receipts should !e responsi!le for preparin documents thatreduce accounts receiva!le !alances. !.(esponsi!ility for approval of the write off of uncollecta!le accounts receiva!le should  !e assined to the cashier.c.)alances in the su!sidiary accounts receiva!le leder should !e reconciled to the eneral leder control account once a year, prefera!ly at year end.d.The !illin function should !e assined to people other than those responsi!le for maintainin accounts receiva!le su!sidiary records. *.%hich of the followin would !e the best   protection for a company that wishes to prevent the +lappin of trade accounts receiva!le&a.Sereate duties so that the !oo##eeper in chare of the eneral leder has no  access to incomin mail. !.Sereate duties so that no  employee has access to !oth chec#s from customers and currency from daily cash receipts.c.-ave customers send payments directly to the company s depository !an#.d.(equest that customers payment chec#s !e made paya!le to the company and addressed to the treasurer..Matchin the supplier s invoice, the purchase order, and the receivin report normally should !e the responsi!ility of thea.warehouse receivin function !.purchasin functionc.eneral accountin functiond.treasury function/.To avoid potential errors and irreularities, a well desined system of internal accountin control in theaccounts paya!le area should include a separation of which of the followin functions&a.cash dis!ursements and vendor invoice verification !.vendor invoice verification and merchandise orderinc.physical handlin of merchandise received and preparation of receivin reportsd.chec# sinin and cancelation of payment documentation0.t would !e appropriate for the payroll accountin department to !e responsi!le for which of the followin functions&a.approvin employee time records !.maintainin records of employment, dischares, and pay increasesc.preparin periodic overnment reports as to employees earnins and withholdin ta2esd.temporarily retainin unclaimed employee paychec#s3.4ac#son, the purchasin aent of 4udd -ardware %holesalers, has a relative who owns a retail hardware store. 4ac#son arraned for hardware to !e delivered !y manufacturers to the retail store on a C.'.5. !asis, there!y ena!lin his relative to !uy at 4udd s wholesale prices. 4ac#son was pro!a!ly a!le to accomplish this !ecause of 4udd s poor internal control over a.purchase orders   !.purchase requisitionsc.cash receiptsd.perpetual inventory records6.To determine whether the system of internal accountin control operated effectively to minimi7e errors of failure to invoice a shipment, the auditor would select a sample of transactions from the  population represented !y thea.customer order file !.!ill of ladin filec.open invoice filed.sales invoice file8.9or effective internal accountin control, employees maintainin the accounts receiva!le su!sidiary leder should not   also approvea.employee overtime waes !.credit ranted to customersc.write:offs of customer accountsd.cash dis!ursements1;.%hich of the followin departments should have the responsi!ility for authori7in payroll rate chanes&a.personnel !.payrollc.treasurer d.time#eepin11.%hich of the followin control procedures may prevent the failure to !ill customers for some shipments&a.<ach shipment should !e supported !y a prenum!ered sales invoice that is accounted for. !.<ach sales order should !e approved !y authori7ed personnel.c.Sales =ournal entries should !e reconciled to daily sales summaries.d.<ach sales invoice should !e supported !y a shippin document.1$.To achieve ood internal accountin control, which department should perform the activities of matchin shippin documents with sales orders and preparin daily sales summaries&a.!illin !.shippinc.creditd.sales order 1*.%hich of the followin constitutes the most sinificant ris# within the purchasin cycle&a.(eceivin department personnel sin receivin documents without inspectin or countinoods. !.>are quantities of relatively ine2pensive parts are stored in open areas near wor#stationsto reduce production slowdowns.c.Poor records of transfers !etween warehouses often result in unnecessary purchases and e2cess inventories.d.%arehouse personnel do not compare quantities received to quantities shown on transfer tic#ets.1.?pon receipt of a requisition, the stores manaer initiates a three part purchase order. Two copies o to the vendor and one copy stays in the stores file. ?pon receipt of the oods, the stores manaer matches the purchase order with the invoice and forwards them to accounts paya!le for payment. %hich of the followin statements !est descri!es the internal control over purchasin&a.Adequate internal control e2ists. !.nadequate separation of duties e2ists.  c.nadequate control over accounts paya!le e2ists.d.nadequate control over the requisition process e2ists.1/.Shippin documents should !e compared with sales records or invoices toa.5etermine whether payments are properly applied to customer accounts. !.Assure that shipments are !illed to customers.c.5etermine whether unit prices !illed are in accordance with sales contracts.d.Ascertain whether all sales are supported !y shippin documents.10.An appropriate compliance test to confirm that only valid employees are on the payroll is to ensure thata.Separate personnel folders are oriinated for each new employee. !.Payroll chec#s are delivered directly to each supervisor !y the payroll cler#.c.Personnel places names on payroll only on the !asis of written prenum!ered authori7ations.d.Payroll !an# accounts are reconciled monthly !y appropriate personnel.13.%hich of the followin would !e the most appropriate test to determine whether purchase orders are  !ein processed on a timely !asis&a.5etermine the dates of unpaid accounts paya!le invoices. !.Compare dates of selected purchase orders with those of purchase requisitions.c.Select a !loc# of used purchase order num!ers and account for all num!ers in the !loc#.d.5iscuss processin procedures with operatin personnel and o!serve actual processin of  purchases.16.As payments are received, one mailroom employee is assined the responsi!ility of prelistin receipts and preparin the deposit slip prior to forwardin the receipts, deposit slip, and remittance advices to accounts receiva!le for postin. Accounts receiva!le personnel refoot the deposit slip, stamp a restrictive endorsement on the !ac# of each chec#, and then forward the receipts and deposit slip to thetreasury department. <valuate the internal control of the descri!ed process. %hich of the followin is a reasona!le assessment of internal control in this process&a.Adequate internal control. !.nadequate internal control !ecause mailroom employees should not   have access to cash.c.nadequate internal control !ecause treasury employees should prepare the deposit slip.d.nadequate internal control !ecause of a lac# of separation of duties.18.%hich of the followin procedures, noted !y an auditor durin a preliminary survey of the payroll function, indicates inadequate control&a.All chanes to payroll data are documented !y the personnel department on authori7ed chane forms. !.Prior to distri!ution, payroll chec#s are verified to a computer produced payroll reister.c.A separate payroll !an# account is used and payroll chec#s are sined !y the treasurer and distri!uted !y personnel from the treasurer s office.d.All unclaimed payroll chec#s are returned to the payroll cler# for disposition.$;.%hich of the followin internal control procedures will most   li#ely prevent the concealment of a cash shortae resultin from the improper write:off of a trade accounts receiva!le&a.%rite offs must !e approved !y a responsi!le officer after review of credit department recommendations and supportin evidence. !.%rite offs must !e supported !y an ain schedule showin that only receiva!les overdueseveral months have !een written off.c.%rite offs must !e approved !y the cashier who is in a position to #now if the receiva!leshave, in fact, !een collected.d.%rite offs must !e authori7ed !y company field sales employees who are in a position to determine the financial standin of the customers.$1.9or the purpose of proper accountin control, postdated chec#s remitted !y customers should !e  a.restrictively endorsed !.returned to the customer c.recorded as a cash saled.placed in the =oint custody of two officers$$.Proper internal control over the cash payroll function would mandate which of the followin&a.The payroll cler# should fill the envelopes with cash and a computation of the net waes. !.?nclaimed pay envelopes should !e retained !y the paymaster.c.<ach employee should !e as#ed to sin a receipt.d.A separate chec#in account for payroll should !e maintained.$*.A company policy should clearly indicate that defective merchandise returned !y customers is to !e delivered to thea.sales cler#  !.receivin cler# c.inventory control cler# d.accounts receiva!le cler# $.A CPA reviews a client s payroll procedures. The CPA would consider internal control to !e less than effective if a payroll department supervisor was assined the responsi!ility for a.reviewin and approvin time reports for su!ordinate employees. !.distri!utin payroll chec#s to employees.c.hirin su!ordinate employees.d.initiatin requests for salary ad=ustments for su!ordinate employees.$/.To conceal defalcations involvin receiva!les, the auditor would e2pect an e2perienced !oo##eeper to chare which of the followin accounts&a.miscellaneous income !.petty cashc.miscellaneous e2pensed.sales returns$0.The most li#ely result of ineffective internal control policies and procedures in the revenue cycle is thata.irreularities in recordin transactions in the su!sidiary accounts could result in a delay inoods shipped. !.omission of shippin documents could o undetected, causin an understatement of inventory.c.final authori7ation of credit memos !y personnel in the sales department could permit an employee defalcation scheme.d.ficititious transactions could !e recorded, causin an understatement of revenues and overstatement of receiva!les.$3.Proper authori7ation procedures in the revenue cycle usually provide for the approval of !ad de!t writeoffs !y an employee in which of the followin departments&a.treasurer  !.salesc.!illind.accounts receiva!le$6.nternal accountin control is strenthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to thea.department that initiated the requisition !.receivin departmentc.purchasin aentd.accounts paya!le department
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