Question 1
Which of the following observations, made during the preliminary survey of a local department store's
disbursement cycle, reflects a control strength?
A. Individual department managers are responsible for the movement of merchandise from the receiving dock
to storage or sales areas as appropriate.
B. The treasurer's office prepares checks for suppliers based on vouchers prepared by the accounts payable
department.
C. Individual department managers use prenumbered forms to order merchandise from vendors.
D. The receiving department is given a copy of the purchase order complete with a description of goods,
quantity ordered, and extended price for all merchandise ordered.
Question 2
To minimize the risk that agents in the purchasing department will use their positions for personal gain, the
organization should
A. Request internal auditors to confirm selected purchases and accounts payable.
B. Specify that all items purchased must pass value-per-unit-of-cost reviews.
C. Rotate purchasing agent assignments periodically.
D. Direct the purchasing department to maintain records on purchase prices paid, with review of such being
required each 6 months.
Question 3
Which of the following describes the most effective preventive control to ensure proper handling of cash receipt
transactions?
A. Predetermined totals (hash totals) of cash receipts are used to control posting routines.
B. One employee issues a prenumbered receipt for all cash collections; another employee reconciles the daily
total of prenumbered receipts to the bank deposits.
C. Bank reconciliations are prepared by an employee not involved with cash collections and then are reviewed
by a supervisor.
D. The employee who receives customer mail receipts prepares the daily bank deposit, which is then deposited
by another employee.
Question 4
An auditor noted that the accounts receivable department is separate from other accounting activities. Credit is
approved by a separate credit department. Control accounts and subsidiary ledgers are balanced monthly.
Similarly, accounts are aged monthly. The accounts receivable manager writes off delinquent accounts after 1
year, or sooner if a bankruptcy or other unusual circumstances are involved. Credit memoranda are
prenumbered and must correlate with receiving reports. Which of the following areas could be viewed as an
internal control weakness of the above organization?
A. Credit approvals.
B. Monthly aging of receivables.
C. Handling of credit memos.
D. Write-offs of delinquent accounts.
Question 5
Marport Company is a manufacturing company that uses forms and documents in its accounting information
systems for record keeping and internal control.
The departments in Marport's organization structure and their primary responsibilities are:
Accounts Payable -- authorize payments and prepare vouchers.
Accounts Receivable -- maintain customer accounts.
Billing -- prepare invoices to customers for goods sold.
Cashier -- maintain a record of cash receipts and disbursements.
Credit Department -- verify the credit rating of customers.
Cost Accounting -- accumulate manufacturing costs for all goods produced.
Finished Goods Storeroom -- maintain the physical inventory and related stock records of finished goods.
General Accounting -- maintain all records for the company's general ledger.
Internal Audit -- appraise and monitor internal controls, as well as conduct operational and management audits.
Inventory Control -- maintain perpetual inventory records for all manufacturing materials and supplies.
Mailroom -- process incoming, outgoing, and interdepartmental mail.
Payroll -- compute and prepare the company payroll.
Personnel -- hire employees, as well as maintain records on job positions and employees.
Purchasing -- place orders for materials and supplies.
Production -- manufacture finished goods.
Production Planning -- decide the types and quantities of products to be produced.
Receiving -- receive all materials and supplies.
Sales -- accept orders from customers.
Shipping -- ship goods to customers.
Stores Control -- safeguard all materials and supplies until needed for production.
Timekeeping -- prepare and control time worked by hourly employees.
Multiple copies of the purchase order are prepared for record keeping and distribution with a copy of the
purchase order sent to the vendor and one retained by the Purchasing Department. In addition, for proper
informational flow and internal control purposes, a version of the purchase order would be distributed to the
A. Accounts Payable, Receiving, and Inventory Control Departments.
B. Accounts Payable, Accounts Receivable, and Receiving Departments.
C. Accounts Payable, Receiving, and Production Planning Departments.
D. Accounts Payable, Receiving, and Stores Control Departments.
Question 6
A bill of lading is a document that
A. Is sent with the goods giving a listing of the quantities of items included in the shipment.
B. Reduces a customer's account for goods returned to the seller.
C. Is used to transfer responsibility for goods between the seller of goods and a common carrier.
D. Summarizes data relating to a disbursement and represents final authorization for payment.
Question 7
Accounting controls are concerned with the safeguarding of assets and the reliability of financial records.
Consequently, these controls are designed to provide reasonable assurance that all of the following take place
except
A. Permitting access to assets in accordance with management's authorization.
B. Compliance with methods and procedures ensuring operational efficiency and adherence to managerial
policies.
C. Comparing recorded assets with existing assets at periodic intervals and taking appropriate action with
respect to differences.
D. Executing transactions in accordance with management's general or specific authorization.
Question 8
An audit of the payroll function revealed several instances in which a payroll clerk had added fictitious
employees to the payroll and deposited the checks in accounts of close relatives. What control should have
prevented such actions?
A. Establishing a policy to deal with close relatives working in the same department.
B. Having the treasurer's office sign payroll checks.
C. Allowing changes to the payroll to be authorized only by the personnel department.
D. Using time cards and attendance records in the computation of employee gross earnings.
Question 9
The procedure that would best discourage the resubmission of vendor invoices after they have been paid is
A. The cancellation of vouchers by treasurer personnel.
B. The cancellation of vouchers by accounting personnel.
C. The mailing of payments directly to payees by accounting personnel.
D. A requirement for double endorsement of checks.
Question 10
A restaurant food chain has over 680 restaurants. All food orders for each restaurant are required to be input
into an electronic device which records all food orders by food servers and transmits the order to the kitchen for
preparation. All food servers are responsible for collecting cash for all their orders and must turn in cash at the
end of their shift equal to the sales value of food ordered for their I.D. number. The manager then reconciles the
cash received for the day with the computerized record of food orders generated. All differences are
investigated immediately by the restaurant. Corporate headquarters has established monitoring controls to
determine when an individual restaurant might not be recording all its revenue and transmitting the applicable
cash to the corporate headquarters. Which one of the following would be the best example of a monitoring
control?
A. All food orders must be entered on the computer, and segregation of duties is maintained between the food
servers and the cooks.
B. The restaurant manager reconciles the cash received with the food orders recorded on the computer.
C. Cash is transmitted to corporate headquarters on a daily basis.
D. Management prepares a detailed analysis of gross margin per store and investigates any store that shows a
significantly lower gross margin.
