Chapter 3

1.The ethical principle of justice asserts that the benefits of the decision should be distributed fairly to those who share the risks.

ANS: T PTS: 1

2. The ethical principle of informed consent suggests that the decision should be implemented so as to minimize all of the risks and to avoid any unnecessary risks.

ANS: F PTS: 1

3. Employees should be made aware of the firm’s commitment to ethics.

ANS: T PTS: 1

4. Business ethics is the analysis of the nature and social impact of computer technology, and the corresponding formulation and justification of policies for the ethical use of such technology.

ANS: F PTS: 1

5. Para computer ethics is the exposure to stories and reports found in the popular media regarding the good or bad ramifications of computer technology.

ANS: F PTS: 1

6. Source code is an example of intellectual property.

ANS: T PTS: 1

7. Copyright laws and computer industry standards have been developed jointly and rarely conflict.

ANS: F PTS: 1

8. Business bankruptcy cases always involve fraudulent behavior.

ANS: F PTS: 1

9. Defalcation is another word for financial fraud.

ANS: T PTS: 1

10. The trend toward distributed data processing increases the exposure to fraud from remote locations.

ANS: T PTS: 1

11. The external auditor is responsible for establishing and maintaining the internal control system.

ANS: F PTS: 1

12. Segregation of duties is an example of an internal control procedure.

ANS: T PTS: 1

13. Controls in a computer-based information system are identical to controls in a manual system.

ANS: F PTS: 1

14. Preventive controls are passive techniques designed to reduce fraud.

ANS: T PTS: 1

15. Ethical issues and legal issues are essentially the same.

ANS: F PTS: 1

16. Internal control systems are recommended but not required of firms subject to the Foreign Corrupt Practices Act.

ANS: F PTS: 1

17. Operations fraud is the misuse or theft of the firm’s computer resources.

ANS: T PTS: 1

18. The Foreign Corrupt Practices Act requires only that a firm keep good records.

ANS: F PTS: 1

19. A key modifying assumption in internal control is that the internal control system is the responsibility of management.

ANS: T PTS: 1

20. Database management fraud includes altering, updating, and deleting an organization’s data.

ANS: F PTS: 1

21. While the Sarbanes-Oxley Act prohibits auditors from providing non-accounting services to their audit clients, they are not prohibited from performing such services for non-audit clients or privately held companies.

ANS: T PTS: 1

22. The Sarbanes-Oxley Act requires the audit committee to hire and oversee the external auditors.

ANS: T PTS: 1

23. Section 404 requires that corporate management (including the CEO) certify their organization’s internal controls on a quarterly and annual basis.

ANS: F PTS: 1

24. Section 302 requires the management of public companies to assess and formally report on the effectiveness of their organization’s internal controls.

ANS: F PTS: 1

25. The objective of SAS 99 is to seamlessly blend the auditor’s consideration of fraud into all phases of the audit process.

ANS: T PTS: 1

MULTIPLE CHOICE

1. Which ethical principle states that the benefit from a decision must outweigh the risks, and that there is no alternative decision that provides the same or greater benefit with less risk?a. minimize riskb. justicec. informed consentd. proportionality

ANS: D PTS: 1

2. Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics?a. para computer ethicsb. pop computer ethicsc. theoretical computer ethicsd. practical computer ethics

ANS: A PTS: 1

3. All of the following are issues of computer security excepta. releasing incorrect data to authorized individualsb. permitting computer operators unlimited access to

the computer roomc. permitting access to data by unauthorized

individualsd. providing correct data to unauthorized individuals

ANS: B PTS: 1

4. Which characteristic is not associated with software as intellectual property?a. uniqueness of the productb. possibility of exact replicationc. automated monitoring to detect intrudersd. ease of dissemination

ANS: C PTS: 1

5. For an action to be called fraudulent, all of the following conditions are required excepta. poor judgmentb. false representationc. intent to deceived. injury or loss

ANS: A PTS: 1

6. One characteristic of employee fraud is that the frauda. is perpetrated at a level to which internal controls

do not applyb. involves misstating financial statementsc. involves the direct conversion of cash or other

assets to the employee’s personal benefitd. involves misappropriating assets in a series of

complex transactions involving third parties

ANS: C PTS: 1

7. Forces which may permit fraud to occur do not includea. a gambling addictionb. lack of segregation of dutiesc. centralized decision making environmentd. questionable integrity of employees

ANS: C PTS: 1

8. Which of the following best describes lapping?a. applying cash receipts to a different customer’s

account in an attempt to conceal previous thefts of funds

b. inflating bank balances by transferring money among different bank accounts

c. expensing an asset that has been stolend. creating a false transaction

ANS: A PTS: 1

9. Operations fraud includesa. altering program logic to cause the application to

process data incorrectlyb. misusing the firm’s computer resourcesc. destroying or corrupting a program’s logic using a

computer virusd. creating illegal programs that can access data files

to alter, delete, or insert values

ANS: B PTS: 1

10. Who is responsible for establishing and maintaining the internal control system?a. the internal auditorb. the accountantc. managementd. the external auditor

ANS: C PTS: 1

11. The concept of reasonable assurance suggests thata. the cost of an internal control should be less than

the benefit it providesb. a well-designed system of internal controls will

detect all fraudulent activityc. the objectives achieved by an internal control

system vary depending on the data processing method

d. the effectiveness of internal controls is a function of the industry environment

ANS: A PTS: 1

12. Which of the following is not a limitation of the internal control system?a. errors are made due to employee fatigueb. fraud occurs because of collusion between two

employeesc. the industry is inherently riskyd. management instructs the bookkeeper to make

fraudulent journal entries

ANS: C PTS: 1

13. The most cost-effective type of internal control isa. preventive controlb. accounting controlc. detective controld. corrective control

ANS: A PTS: 1

14. Which of the following is a preventive control?a. credit check before approving a sale on accountb. bank reconciliationc. physical inventory countd. comparing the accounts receivable subsidiary

ledger to the control account

ANS: A PTS: 1

15. A well-designed purchase order is an example of aa. preventive controlb. detective controlc. corrective controld. none of the above

ANS: A PTS: 1

16. A physical inventory count is an example of aa. preventive controlb. detective controlc. corrective controld. feedforward control

ANS: B PTS: 1

17. The bank reconciliation uncovered a transposition error in the books. This is an example of aa. preventive controlb. detective controlc. corrective controld. none of the above

ANS: B PTS: 1

18. In balancing the risks and benefits that are part of every ethical decision, managers receive guidance from each of the following excepta. justiceb. self interestc. risk minimizationd. proportionality

ANS: B PTS: 1

19. Which of the following is not an element of the internal control environment?a. management philosophy and operating styleb. organizational structure of the firmc. well-designed documents and recordsd. the functioning of the board of directors and the

audit committee

ANS: C PTS: 1

20. Which of the following suggests a weakness in the internal control environment?a. the firm has an up-to-date organizational chartb. monthly reports comparing actual performance to

budget are distributed to managersc. performance evaluations are prepared every three

yearsd. the audit committee meets quarterly with the

external auditors

ANS: C PTS: 1

21. Which of the following indicates a strong internal control environment?a. the internal audit group reports to the audit

committee of the board of directors

b. there is no segregation of duties between organization functions

c. there are questions about the integrity of management

d. adverse business conditions exist in the industry

ANS: A PTS: 1

22. According to SAS 78, an effective accounting system performs all of the following excepta. identifies and records all valid financial

transactionsb. records financial transactions in the appropriate

accounting periodc. separates the duties of data entry and report

generationd. records all financial transactions promptly

ANS: C PTS: 1

23. Which of the following is the best reason to separate duties in a manual system?a. to avoid collusion between the programmer and

the computer operatorb. to ensure that supervision is not requiredc. to prevent the record keeper from authorizing

transactionsd. to enable the firm to function more efficiently

ANS: C PTS: 1

24. Segregation of duties in the computer-based information system includesa. separating the programmer from the computer

operatorb. preventing management overridec. separating the inventory process from the billing

processd. performing independent verifications by the

computer operator

ANS: A PTS: 1

25. Which of the following is not an internal control procedure?a. authorizationb. management’s operating stylec. independent verificationd. accounting records

ANS: B PTS: 1

26. The decision to extend credit beyond the normal credit limit is an example ofa. independent verificationb. authorization

c. segregation of functionsd. supervision

ANS: B PTS: 1

27. When duties cannot be segregated, the most important internal control procedure isa. supervisionb. independent verificationc. access controlsd. accounting records

ANS: A PTS: 1

28. An accounting system that maintains an adequate audit trail is implementing which internal control procedure?a. access controlsb. segregation of functionsc. independent verificationd. accounting records

ANS: D PTS: 1

29. Employee fraud involves three steps. Of the following, which is not involved?a. concealing the crime to avoid detectionb. stealing something of valuec. misstating financial statementsd. converting the asset to a usable form

ANS: C PTS: 1

30. Which of the following is not an example of independent verification?a. comparing fixed assets on hand to the accounting

recordsb. performing a bank reconciliationc. comparing the accounts payable subsidiary ledger

to the control accountd. permitting authorized users only to access the

accounting system

ANS: D PTS: 1

31. The importance to the accounting profession of the Foreign Corrupt Practices Act of 1977 is thata. bribery will be eliminatedb. management will not override the company’s

internal controlsc. firms are required to have an effective internal

control systemd. firms will not be exposed to lawsuits

ANS: C PTS: 1

32. The board of directors consists entirely of personal friends of the chief executive officer. This indicates a weakness ina. the accounting systemb. the control environmentc. control proceduresd. this is not a weakness

ANS: B PTS: 1

33. Computer fraud can take on many forms, including each of the following excepta. theft or illegal use of computer-readable

informationb. theft, misuse, or misappropriation of computer

equipmentc. theft, misuse, or misappropriation of assets by

altering computer-readable records and filesd. theft, misuse, or misappropriation of printer

supplies

ANS: D PTS: 1

34. When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity?a. segregation of dutiesb. accounting recordsc. accounting systemd. access controls

ANS: A PTS: 1

35. The office manager forgot to record in the accounting records the daily bank deposit. Which control procedure would most likely prevent or detect this error?a. segregation of dutiesb. independent verificationc. accounting recordsd. supervision

ANS: B PTS: 1

36. Business ethics involvesa. how managers decide on what is right in

conducting businessb. how managers achieve what they decide is right

for the businessc. both a and bd. none of the above

ANS: C PTS: 1

37. All of the following are conditions for fraud excepta. false representationb. injury or lossc. intentd. material reliance

ANS: D PTS: 1

38. The four principal types of fraud include all of the following excepta. briberyb. gratuitiesc. conflict of interestd. economic extortion

ANS: B PTS: 1

39. The characteristics of useful information includea. summarization, relevance, timeliness, accuracy,

and completenessb. relevance, summarization, accuracy, timelessness,

and completenessc. timeliness, relevance, summarization, accuracy,

and concisenessd. disaggregation, relevance, timeliness, accuracy,

and completeness

ANS: A PTS: 1

40. Internal control system have limitations. These includea. possibility of honest errorb. circumventionc. management overrided. stability of systems

ANS: D PTS: 1

41. Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits is least likely to occur?a. reduced cost of an external audit.b. prevents employee collusion to commit fraud.c. availability of reliable data for decision-making

purposes.d. some assurance of compliance with the Foreign

Corrupt Practices Act of 1977.e. some assurance that important documents and

records are protected.

ANS: B PTS: 1

42. Which of the following situations is not a segregation of duties violation?

a. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine.

b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low.

c. The sales manager has the responsibility to approve credit and the authority to write off accounts.

d. The department time clerk is given the undistributed payroll checks to mail to absent employees.

e. The accounting clerk who shares the record keeping responsibility for the accounts receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger and the control account.

ANS: B PTS: 1

43. Which of the following is not an issue to be addressed in a business code of ethics required by the SEC?a. Conflicts of interestb. Full and Fair Disclosuresc. Legal Complianced. Internal Reporting of Code Violationse. All of the above are issues to be addressed

ANS: E PTS: 1

Chapter4

1.The packing slip is also known as the shipping notice.

ANS: F PTS: 1

2. The bill of lading is a legal contract between the buyer and the seller.

ANS: F PTS: 1

3. Another name for the stock release form is the picking ticket.

ANS: T PTS: 1

4. Warehouse stock records are the formal accounting records for inventory.

ANS: F PTS: 1

5. The purpose of the invoice is to bill the customer.

ANS: T PTS: 1

6. In most large organizations, the journal voucher file has replaced the formal general journal.

ANS: T PTS: 1

7. The cash receipts journal is a special journal.

ANS: T PTS: 1

8. In the revenue cycle, the internal control “limit access” applies to physical assets only.

ANS: F PTS: 1

9. In real-time processing systems, routine credit authorizations are automated.

ANS: T PTS: 1

10. In a computerized accounting system, segregation of functions refers to inventory control, accounts receivable, billing, and general ledger tasks.

ANS: F PTS: 1

11. A written customer purchase order is required to trigger the sales order system.

ANS: F PTS: 1

12. Inventory control has physical custody of inventory.

ANS: F PTS: 1

13. The principal source document in the sales order system is the sales order.

ANS: T PTS: 1

14. Sales orders should be prenumbered documents.

ANS: T PTS: 1

15. Integrated accounting systems automatically transfer data between modules.

ANS: T PTS: 1

16. If a customer submits a written purchase order, there is no need to prepare a sales order.

ANS: F PTS: 1

17. Sales return involves receiving, sales, credit, and billing departments, but not accounts receivable.

ANS: F PTS: 1

18. A remittance advice is a form of turn-around document.

ANS: T PTS: 1

19. A bill of lading is a request for payment for shipping charges.

ANS: F PTS: 1

20. In point of sale systems, authorization takes the form of validation of credit card charges.

ANS: T PTS: 1

MULTIPLE CHOICE

1. The revenue cycle consists ofa. one subsystem–order entryb. two subsystems–sales order processing and cash

receiptsc. two subsystems–order entry and inventory controld. three subsystems–sales order processing, credit

authorization, and cash receipts

ANS: B PTS: 1

2. The reconciliation that occurs in the shipping department is intended to ensure thata. credit has been approvedb. the customer is billed for the exact quantity

shippedc. the goods shipped match the goods orderedd. inventory records are reduced for the goods

shipped

ANS: C PTS: 1

3. The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in thea. warehouseb. shipping departmentc. billing departmentd. inventory control department

ANS: D PTS: 1

4. Which document triggers the revenue cycle?a. the sales orderb. the customer purchase orderc. the sales invoiced. the journal voucher

ANS: B PTS: 1

5. Copies of the sales order can be used for all of the following excepta. purchase orderb. credit authorizationc. shipping noticed. packing slip

ANS: A PTS: 1

6. The purpose of the sales invoice is toa. record reduction of inventoryb. transfer goods from seller to shipperc. bill the customerd. select items from inventory for shipment

ANS: C PTS: 1

7. The customer open order file is used toa. respond to customer queriesb. fill the customer orderc. ship the customer orderd. authorize customer credit

ANS: A PTS: 1

8. The stock release copy of the sales order is not used toa. locate and pick the items from the warehouse

shelvesb. record any out-of-stock itemsc. authorize the warehouse clerk to release custody

of the inventory to shippingd. record the reduction of inventory

ANS: D PTS: 1

9. The shipping noticea. is mailed to the customerb. is a formal contract between the seller and the

shipping companyc. is always prepared by the shipping clerkd. informs the billing department of the quantities

shipped

ANS: D PTS: 1

10. The billing department is not responsible fora. updating the inventory subsidiary recordsb. recording the sale in the sales journalc. notifying accounts receivable of the saled. sending the invoice to the customer

ANS: A PTS: 1

11. Customers should be billed for backorders whena. the customer purchase order is receivedb. the backordered goods are shippedc. the original goods are shippedd. customers are not billed for backorders because a

backorder is a lost sale

ANS: B PTS: 1

12. Usually specific authorization is required for all of the following excepta. sales on account which exceed the credit limitb. sales of goods at the list pricec. a cash refund for goods returned without a receiptd. write off of an uncollectible account receivable

ANS: B PTS: 1

13. Which of following functions should be segregated?a. opening the mail and making the journal entry to

record cash receiptsb. authorizing credit and determining reorder

quantitiesc. maintaining the subsidiary ledgers and handling

customer queriesd. providing information on inventory levels and

reconciling the bank statement

ANS: A PTS: 1

14. Which situation indicates a weak internal control structure?a. the mailroom clerk authorizes credit memosb. the record keeping clerk maintains both accounts

receivable and accounts payable subsidiary ledgers

c. the warehouse clerk obtains a signature before releasing goods for shipment

d. the accounts receivable clerk prepares customer statements every month

ANS: A PTS: 1

15. The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is toa. supervise the accounts receivable departmentb. limit access to credit memorandac. prenumber and sequence check all credit

memorandad. require management approval for all credit

memoranda

ANS: D PTS: 1

16. The accounts receivable clerk destroys all invoices for sales made to members of her family and does not record the sale in the accounts receivable subsidiary ledger. Which procedure will not detect this fraud?a. prenumber and sequence check all invoicesb. reconcile the accounts receivable control to the

accounts receivable subsidiary ledgerc. prepare monthly customer statementsd. reconcile total sales on account to the debits in the

accounts receivable subsidiary ledger

ANS: C PTS: 1

17. Which department is least likely to be involved in the revenue cycle?a. creditb. accounts payablec. billingd. shipping

ANS: B PTS: 1

18. Which document is included with a shipment sent to a customer?a. sales invoiceb. stock release formc. packing slipd. shipping notice

ANS: C PTS: 1

19. Good internal controls in the revenue cycle should ensure all of the following excepta. all sales are profitableb. all sales are recordedc. credit is authorizedd. inventory to be shipped is not stolen

ANS: A PTS: 1

20. Which control does not help to ensure that accurate records are kept of customer accounts and inventory?a. reconcile accounts receivable control to accounts

receivable subsidiaryb. authorize creditc. segregate custody of inventory from record

keepingd. segregate record keeping duties of general ledger

from accounts receivable

ANS: B PTS: 1

21. Internal controls for handling sales returns and allowances do not includea. computing bad debt expense using the percentage

of credit salesb. verifying that the goods have been returnedc. authorizing the credit memo by managementd. using the original sales invoice to prepare the

sales returns slip

ANS: A PTS: 1

22. The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. The best internal control to detect this error isa. a batch total of sales invoices to be prepared

compared to the actual number of sales invoices prepared

b. sequentially numbered sales invoicesc. visual verification that all sales invoices were

preparedd. none of the above will detect this error

ANS: A PTS: 1

23. Which department prepares the bill of lading?a. salesb. warehousec. shippingd. credit

ANS: C PTS: 1

24. A remittance advice isa. used to increase (debit) an account receivable by

the cash receivedb. is a turn-around documentc. is retained by the customer to show proof of

paymentd. none of the above

ANS: B PTS: 1

25. A weekly reconciliation of cash receipts would include comparinga. the cash prelist with bank deposit slipsb. the cash prelist with remittance advicesc. bank deposit slips with remittance advicesd. journal vouchers from accounts receivable and

general ledger

ANS: A PTS: 1

26. At which point is supervision most critical in the cash receipts system?a. accounts receivableb. general ledgerc. mail roomd. cash receipts

ANS: C PTS: 1

27. EDI trading partner agreements specify all of the following excepta. selling priceb. quantities to be soldc. payment termsd. person to authorize transactions

ANS: D PTS: 1

28. A cash prelist isa. a document that records sales returns and

allowancesb. a document returned by customers with their

paymentsc. the source of information used to prepare monthly

statementsd. none of the above

ANS: D PTS: 1

29. An advantage of real-time processing of sales isa. the cash cycle is lengthenedb. current inventory information is availablec. hard copy documents provide a permanent record

of the transactiond. data entry errors are corrected at the end of each

batch

ANS: B PTS: 1

30. Commercial accounting systems have fully integrated modules. The word “integrated” means thata. segregation of duties is not possibleb. transfer of information among modules occurs

automaticallyc. batch processing is not an optiond. separate entries are made in the general ledger

accounts and the subsidiary ledgers

ANS: B PTS: 1

31. The data processing method that can shorten the cash cycle isa. batch, sequential file processingb. batch, direct access file processingc. real-time file processingd. none of the above

ANS: C PTS: 1

32. Which of the following is not a risk exposure in a microcomputer accounting system?a. reliance on paper documentation is increasedb. functions that are segregated in a manual

environment may be combined in a microcomputer accounting system

c. backup procedures require human interventiond. data are easily accessible

ANS: A PTS: 1

33. Which journal is not used in the revenue cycle?a. cash receipts journalb. sales journalc. purchases journald. general journal

ANS: C PTS: 1

34. Periodically, the general ledger department receives all of the following excepta. total increases to accounts receivableb. total of all sales backordersc. total of all salesd. total decreases in inventory

ANS: B PTS: 1

35. The credit departmenta. prepares credit memos when goods are returnedb. approves credits to accounts receivable when

payments are receivedc. authorizes the granting of credit to customersd. none of the above

ANS: C PTS: 1

36. Adjustments to accounts receivable for payments received from customers is based upona. the customer’s checkb. the cash prelistc. the remittance advice that accompanies paymentd. a memo prepared in the mailroom

ANS: C PTS: 1

37. The revenue cycle utilizes all of the following files excepta. credit memo fileb. sales history filec. shipping report filed. cost data reference file

ANS: D PTS: 1

38. All of the following are advantages of real-time processing of sales excepta. The cash cycle is shortenedb. Paper work is reducedc. Incorrect data entry is difficult to detectd. Up-to-date information can provide a competitive

advantage in the marketplace

ANS: C PTS: 1

39. Which document is NOT prepared by the sales department?a. packing slipb. shipping noticec. bill of ladingd. stock release

ANS: C PTS: 1

40. Which type of control is considered a compensating control?a. segregation of dutiesb. access controlc. supervisiond. accounting records

ANS: C PTS: 1

Chapter 5

Purchasing decisions are authorized by inventory control.

ANS: T PTS: 1

2. The blind copy of the purchase order that goes to the receiving department contains no item descriptions.

ANS: F PTS: 1

3. Firms that wish to improve control over cash disbursements use a voucher system.

ANS: T PTS: 1

4. In a voucher system, the sum of all unpaid vouchers in the voucher register equals the firm’s total voucher payable balance.

ANS: T PTS: 1

5. The accounts payable department reconciles the accounts payable subsidiary ledger to the control account.

ANS: F PTS: 1

6. The use of inventory reorder points suggests the need to obtain specific authorization.

ANS: F PTS: 1

7. Proper segregation of duties requires that the responsibility approving a payment be separated from posting to the cash disbursements journal.

ANS: T PTS: 1

8. A major risk exposure in the expenditure cycle is that accounts payable may be overstated at the end of the accounting year.

ANS: F PTS: 1

9. When a trading partner agreement is in place, the traditional three way match may be eliminated.

ANS: T PTS: 1

10. Authorization of purchases in a merchandising firm occurs in the inventory control department.

ANS: T PTS: 1

11. A three way match involves a purchase order, a purchase requisition, and an invoice.

ANS: F PTS: 1

12. Authorization for a cash disbursement occurs in the cash disbursement department upon receipt of the supplier’s invoice.

ANS: F PTS: 1

13. An automated cash disbursements system can yield better cash management since payments are made on time.

ANS: T PTS: 1

14. Permitting warehouse staff to maintain the only inventory records violates separation of duties.

ANS: T PTS: 1

15. A purchasing system that employs electronic data interchange does not use a purchase order.

ANS: F PTS: 1

16. Inventory control should be located in the warehouse.

ANS: F PTS: 1

17. Inspection of shipments in the receiving department would be improved if the documentation showed the value of the inventory.

ANS: F PTS: 1

18. One reason for authorizing purchases is to enable efficient inventory management.

ANS: T PTS: 1

19. If accounts payable receives an invoice directly from the supplier it needs to be reconciled with the purchase order and receiving report.

ANS: T PTS: 1

20. Supervision in receiving is intended to reduce the theft of assets.

ANS: T PTS: 1

MULTIPLE CHOICE

1. The purpose of the purchase requisition is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order

goodsd. bill for goods delivered

ANS: C PTS: 1

2. The purpose of the receiving report is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order

goodsd. bill for goods delivered

ANS: B PTS: 1

3. All of the following departments have a copy of the purchase order excepta. the purchasing departmentb. the receiving departmentc. accounts payabled. general ledger

ANS: D PTS: 1

4. The purpose of the purchase order is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order

goodsd. approve payment for goods received

ANS: A PTS: 1

5. The open purchase order file in the purchasing department is used to determinea. the quality of items a vendor shipsb. the best vendor for a specific itemc. the orders that have not been receivedd. the quantity of items received

ANS: C PTS: 1

6. The purchase order

a. is the source document to make an entry into the accounting records

b. indicates item description, quantity, and pricec. is prepared by the inventory control departmentd. is approved by the end-user department

ANS: B PTS: 1

7. The reason that a blind copy of the purchase order is sent to receiving is toa. inform receiving when a shipment is dueb. force a count of the items deliveredc. inform receiving of the type, quantity, and price

of items to be deliveredd. require that the goods delivered are inspected

ANS: B PTS: 1

8. The receiving report is used toa. accompany physical inventories to the storeroom

or warehouseb. advise the purchasing department of the dollar

value of the goods deliveredc. advise general ledger of the accounting entry to

be maded. advise the vendor that the goods arrived safely

ANS: A PTS: 1

9. When a copy of the receiving report arrives in the purchasing department, it is used toa. adjust perpetual inventory recordsb. record the physical transfer of inventory from

receiving to the warehousec. analyze the receiving department’s processd. recognize the purchase order as closed

ANS: D PTS: 1

10. The financial value of a purchase is determined by reviewing thea. packing slipb. purchase requisitionc. receiving reportd. supplier’s invoice

ANS: D PTS: 1

11. Which document is least important in determining the financial value of a purchase?a. purchase requisitionb. purchase orderc. receiving reportd. supplier’s invoice

ANS: A PTS: 1

12. In a merchandising firm, authorization for the payment of inventory is the responsibility ofa. inventory controlb. purchasingc. accounts payabled. cash disbursements

ANS: C PTS: 1

13. In a merchandising firm, authorization for the purchase of inventory is the responsibility ofa. inventory controlb. purchasingc. accounts payabled. cash disbursements

ANS: A PTS: 1

14. When purchasing inventory, which document usually triggers the recording of a liability?a. purchase requisitionb. purchase orderc. receiving reportd. supplier’s invoice

ANS: D PTS: 1

15. Because of time delays between receiving inventory and making the journal entrya. liabilities are usually understatedb. liabilities are usually overstatedc. liabilities are usually correctly statedd. none of the above

ANS: A PTS: 1

16. Usually the open voucher payable file is organized bya. vendorb. payment due datec. purchase order numberd. transaction date

ANS: B PTS: 1

17. Which of the following statements is not correct?a. the voucher system is used to improve control

over cash disbursementsb. the sum of the paid vouchers represents the

voucher payable liability of the firmc. the voucher system permits the firm to

consolidate payments of several invoices on one voucher

d. many firms replace accounts payable with a voucher payable system

ANS: B PTS: 1

18. In the expenditure cycle, general ledger does nota. post the journal voucher from the accounts

payable departmentb. post the account summary from inventory controlc. post the journal voucher from the purchasing

departmentd. reconcile the inventory control account with the

inventory subsidiary summary

ANS: C PTS: 1

19. The documents in a voucher packet include all of the following excepta. a checkb. a purchase orderc. a receiving reportd. a supplier’s invoice

ANS: A PTS: 1

20. To maintain a good credit rating and to optimize cash management, cash disbursements should arrive at the vendor’s place of businessa. as soon as possibleb. on the due datec. on the discount dated. by the end of the month

ANS: C PTS: 1

21. The cash disbursement clerk performs all of the following tasks excepta. reviews the supporting documents for

completeness and accuracyb. prepares checksc. signs checksd. marks the supporting documents paid

ANS: C PTS: 1

22. When a cash disbursement in payment of an accounts payable is recordeda. the liability account is increasedb. the income statement is changedc. the cash account is unchangedd. the liability account is decreased

ANS: D PTS: 1

23. Authorization for payment of an accounts payable liability is the responsibility ofa. inventory control

b. purchasingc. accounts payabled. cash disbursements

ANS: C PTS: 1

24. Of the following duties, it is most important to separatea. warehouse from storesb. warehouse from inventory controlc. accounts payable and accounts receivabled. purchasing and accounts receivable

ANS: B PTS: 1

25. In a firm with proper segregation of duties, adequate supervision is most critical ina. purchasingb. receivingc. accounts payabled. general ledger

ANS: B PTS: 1

26. The receiving department is not responsible toa. inspect shipments receivedb. count items received from vendorsc. order goods from vendorsd. safeguard goods until they are transferred to the

warehouse

ANS: C PTS: 1

27. The major risk exposures associated with the receiving department include all of the following excepta. goods are accepted without a physical countb. there is no inspection for goods damaged in

shipmentc. inventories are not secured on the receiving dockd. the audit trail is destroyed

ANS: D PTS: 1

28. When searching for unrecorded liabilities at the end of an accounting period, the accountant would search all of the files excepta. the purchase requisition fileb. the cash receipts filec. the purchase order filed. the receiving report file

ANS: B PTS: 1

29. In regards to the accounts payable department, which statement is not true?a. the purchase requisition shows that the

transaction was authorizedb. the purchase order proves that the purchase was

requiredc. the receiving report provides evidence of the

physical receipt of the goodsd. the supplier’s invoice indicates the financial value

of the transaction

ANS: B PTS: 1

30. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual inventory method, who determines when to reorder inventory?a. the inventory control clerkb. the purchasing departmentc. the vendord. the computer system

ANS: D PTS: 1

31. Firms can expect that proper use of a valid vendor file will result in all of the following benefits excepta. purchasing agents will be discouraged from

improperly ordering inventory from related parties

b. purchases from fictitious vendors will be detectedc. the most competitive price will be obtainedd. the risk of purchasing agents receiving kickbacks

and bribes will be reduced

ANS: C PTS: 1

32. In a real-time processing system with a high number of transactions, the best and most practical control over cash disbursements is to havea. all checks manually signed by the treasurerb. all checks signed by check-signing equipmentc. checks over a certain dollar amount manually

signed by the treasurerd. checks over a certain dollar amount manually

signed by the cash disbursements clerk

ANS: C PTS: 1

33. The document which will close the open purchase requisition file is thea. purchase orderb. vendor invoicec. receiving reportd. none of the above

ANS: C PTS: 1

34. Goods received are inspected and counted toa. determine that the goods are in good conditionb. determine the quantity of goods receivedc. preclude payment for goods not received or

received in poor conditiond. all of the above

ANS: D PTS: 1

35. If a company uses a standard cost system, inventory records can be updated from thea. vendor invoiceb. purchase orderc. receiving reportd. purchase requisition

ANS: C PTS: 1

36. If a company uses an actual cost system, inventory records can first be updated from thea. vendor invoiceb. purchase orderc. receiving reportd. purchase requisition

ANS: A PTS: 1

37. Copies of a purchase order are sent to all of the following excepta. inventory controlb. receivingc. general ledgerd. accounts payable

ANS: C PTS: 1

38. The receiving reporta. is used to update the actual cost inventory ledgerb. accompanies the goods to the storeroomc. is sent to general ledgerd. is returned to the vendor to acknowledge receipt

of the goods

ANS: B PTS: 1

39. A supplier invoicea. is included with the goodsb. shows what was ordered even if all was not

shippedc. is sent by vendor to accounts payabled. none of the above

ANS: C PTS: 1

40. The cash disbursement function isa. part of accounts payableb. an independent accounting functionc. a treasury functiond. part of the general ledger department

ANS: C PTS: 1