Question 1

The internal control process that requires physical controls in the warehouse and shipping areas with access to inventory helps to minimize the risk of:

Accepted Answer

A) Incorrect amounts 
B) Stolen goods 
C) Omitted returns 
D) Duplicate purchase returns

Question 2

A company may reject goods received due to a number of reasons.The process related to this is referred to as:

Accepted Answer

A) Purchases 
B) Purchase Returns 
C) Accounts Payable 
D) Receiving

Question 3

Which department is generally responsible for the notification of the need to make cash disbursements and the maintenance of vendor accounts?

Accepted Answer

A) Accounting department 
B) Purchasing department 
C) Accounts payable department 
D) Shipping department

Question 4

When a payment has been made, the cash disbursements clerk will clearly mark the invoice with information pertaining to the date and the check number used to satisfy the obligation.This process is called:

Accepted Answer

A) Marking the invoice 
B) Retiring the invoice 
C) Cancelling the invoice 
D) Destroying the invoice

Question 5

One of the newest technologies related to payables is one where invoices are exchanged and payments are made via the internet.The name given to this process is:

Accepted Answer

A) Random Array of Invoice and Disbursements (RAI
D)  
B) Electronic Invoice Payment Procedures (EIPP) 
C) Electronic Invoice Presentment and Payment (EIPP) 
D) Routing Application Invoice Delivery (RAI
D)

Question 6

Which of the following internal controls wold help prevent overpayment to a vendor or duplicate payment to a vendor?

Accepted Answer

A) Review and cancellation of supporting documents after issuing payment 
B) Requiring the check signer to mail the payment to the vendor 
C) Review of the accounts where the expenditure transaction has been recorded 
D) Approving the purchase before the goods are ordered from the vendor

Question 7

Which of the following is most likely to be effective in deterring fraud by upper level managers?

Accepted Answer

A) Internal controls 
B) An enforced code of ethics 
C) Matching documents prior to payment 
D) Segregating custody of inventory from inventory record keeping

Question 8

The accounting record that includes the details of amounts owed to each vendor is called the:

Accepted Answer

A) Accounts payable subsidiary ledger 
B) Purchases journal 
C) Accounts receivable subsidiary ledger 
D) Receiving log

Question 9

Which of the following is not an independent verification related to cash disbursements?

Accepted Answer

A) The cash disbursements journal is reconciled to the general ledger. 
B) The stock of unused checks should be adequately secured and controlled. 
C) The bank statement is reconciled on a monthly basis. 
D) The accounts payable subsidiary ledger is reconciled to the general ledger.

Question 10

The internal control process that requires the performance of end of period review to determine whether purchases are recorded in the proper period will help to minimize the risk of all of the following EXCEPT:

Accepted Answer

A) Timing issues 
B) Omitted purchases 
C) Duplicate purchases 
D) Stolen goods

Question 11

The security and confidentiality risks of computer-based matching would include:

Accepted Answer

A) Unauthorized access to the system's ordering and matching functions would allow the insertion of fictitious vendors and / or invoices. 
B) Errors in system logic can cause systematic and repetitive errors in matching. 
C) The criteria used to identify duplicate payments may be too tightly defined and will overlook duplicate payments. 
D) System breakdowns or interruptions can stop or slow the processing of invoices and payments.

Question 12

The acquisition of materials and supplies and the related cash disbursements is referred to as:

Accepted Answer

A) The Procurement Process 
B) Systems and Control Process 
C) Expenditure and Return Process 
D) Conversion Process

Question 13

The internal control process of separating the custody of inventory from the accounts payable record keeping will help to minimize the risk of:

Accepted Answer

A) Fictitious purchases 
B) Invalid vendors 
C) Duplicate purchases 
D) Incorrect amounts

Question 14

The internal control process that requires purchase records to be matched and verified for item descriptions, quantities, dates, authorized prices, and mathematical accuracy, will help to minimize the risk of:

Accepted Answer

A) Stolen goods 
B) Omitted transactions 
C) Invalid purchases 
D) Incorrect accumulation

Question 15

Internal control is strengthened by the use of a blind purchase order, upon which the quantity of goods ordered is intentionally left blank.This blind copy is used in which department?

Accepted Answer

A) The department that initiated the purchase request 
B) The receiving department 
C) The purchasing department 
D) The accounts payable department

Question 16

Which of the following questions would most likely be included in an internal control questionnaire concerning the completeness of purchasing transactions?

Accepted Answer

A) Is an authorized purchase order required before the receiving department can accept a shipment or the accounts payable department can record a voucher? 
B) Are prenumbered purchase requisitions used and are they subsequently matched with vendor invoices? 
C) Is there a regular reconciliation of the inventory records with the file of unpaid vouchers? 
D) Are prenumbered purchase orders, receiving reports, and vouchers used, and are the entire sequences accounted for?

Question 17

This document, prepared and maintained by the receiving department, is a sequential listing of all receipts.

Accepted Answer

A) Receiving report 
B) Packing slip 
C) Bill of lading 
D) Receiving log

Question 18

The internal control process of having the receiving reports prepared on pre-numbered forms so that the sequence of receipts can be reviewed for proper recording will help to minimize the related risk of:

Accepted Answer

A) Invalid vendors 
B) Omitted purchases 
C) Fictitious purchases 
D) Timing issues

Question 19

There are four primary functions of corporate governance.Which of the following is NOT one of those functions?

Accepted Answer

A) Availability 
B) Management Oversight 
C) Internal Controls and Compliance 
D) Financial Stewardship

Question 20

There are different ways to issue a purchase order to a vendor.Which of the following is not one of the ways?

Accepted Answer

A) Hard copy via fax or mail 
B) Hard copy by hand 
C) Electronically via e-mail 
D) Directly through the computer network

Exam 9: Expenditures Processes and Controlspurchases