3.

The purpose of the Transaction Processing System includes all of the following
except
(1 Point)

converting economic events into financial transactions

recording financial transactions in the accounting records

distributing essential information to operations personnel to support their daily

operations

measuring and reporting the status of financial resources and the changes in those
resources
4.
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?
(1 Point)

prenumber and sequence check all invoices

reconcile the accounts receivable control to the accounts receivable subsidiary

ledger

prepare monthly customer statements

reconcile total sales on account to the debits in the accounts receivable subsidiary
ledger
5.
Database management tasks do not include
(1 Point)
summarization

storage

retrieval

deletion
6.
Which of the following is not an internal control procedure?
(1 Point)

authorization

management’s operating style

independent verification

accounting records
7.

(1 Point)

order goods from vendors

record receipt of goods from vendors

authorize the purchasing department to order goods

bill for goods delivered
8.
In a merchandising firm, authorization for the payment of inventory is the
responsibility of
(1 Point)

inventory control

purchasing

accounts payable

cash disbursements
9.
The receiving report is used to
(1 Point)

accompany physical inventories to the storeroom or warehouse

advise the purchasing department of the dollar value of the goods delivered

advise general ledger of the accounting entry to be made

advise the vendor that the goods arrived safely

10.
Which of the following is not a characteristic of the Fixed Asset System?
(1 Point)
Acquisitions are routine transactions requiring general authorization.

Retirements are reported on an authorized disposal report form.

Acquisition cost is allocated over the expected life of the asset.

Transfer of fixed assets among departments is recorded in the fixed asset subsidiary
ledger.
11.
Adjustments to accounts receivable for payments received from customers is based
upon
(1 Point)

the customer’s check

the cash prelist

the remittance advice that accompanies payment

a memo prepared in the mailroom

12.
In a firm with proper segregation of duties, adequate supervision is most critical in
(1 Point)

purchasing

receiving

accounts payable
general ledger
13.
The Golf Club Company makes custom golf clubs. The manufacturing supervisor
interviews people who have specialized manufacturing skills, and he informs payroll
when an employee is hired. The employees use a time clock to record the hours they
work. The employees are also required to keep a record of the time they spend
working on each order. The supervisor approves all time cards.

The accountant analyzes the job tickets and prepares a labor distribution summary.
Payroll prepares the payroll register and paychecks. The supervisor distributes the
paychecks to the employees. Payroll informs cash disbursement of the funds
required to cover the entire payroll amount. The cash disbursements clerk ensures
that there are adequate funds in the company's regular checking account to cover
the payroll.

Describe at least two internal control weaknesses; for each weakness suggest an
improvement to internal control.

14.
Asset maintenance involves
(1 Point)

the recording of periodic depreciation

adjusting the asset records to reflect the cost of physical improvements

keeping track of the physical location of the assets

all of the above

15.
Employee fraud involves three steps. Of the following, which is not involved?
(1 Point)
concealing the crime to avoid detection

stealing something of value

misstating financial statements

converting the asset to a usable form

16.
The reconciliation that occurs in the shipping department is intended to ensure that
(1 Point)

credit has been approved

the customer is billed for the exact quantity shipped

the goods shipped match the goods ordered

inventory records are reduced for the goods shipped

17.
In a manufacturing firm, employees use time cards and job tickets. Which of the
following statements is not correct?
(1 Point)

Job tickets are prepared by employees for each job worked on, so an employee may
have more that one job ticket on a given day.

An individual employee will have only one time card.

The time reported on job tickets should reconcile with the time reported on time
cards.

Paychecks should be prepared from the job tickets.

18.
When a firm wants its coding system to convey meaning without reference to any
other document, it would choose
(1 Point)

an alphabetic code

a mnemonic code

a group code

a block code
19.
In a real-time processing system with a high number of transactions, the best and
most practical control over cash disbursements is to have
(1 Point)

all checks manually signed by the treasurer

all checks signed by check-signing equipment

checks over a certain dollar amount manually signed by the treasurer

checks over a certain dollar amount manually signed by the cash disbursements
clerk
20.
An important reconciliation in the payroll system is
(1 Point)

general ledger compares the labor distribution summary from cost accounting to
the disbursement voucher from accounts payable

personnel compares the number of employees authorized to receive a paycheck to

the number of paychecks prepared

production compares the number of hours reported on job tickets to the number of
hours reported on time cards

payroll compares the labor distribution summary to the hours reported on time
cards
21.
Customers should be billed for back-orders when
(1 Point)

the customer purchase order is received

the backordered goods are shipped

the original goods are shipped

customers are not billed for backorders because a backorder is a lost sale
22.
A clerk embezzles customer payments on account and covers up the theft by making
an adjustment to the accounts receivable ledger. Describe a specific internal control
procedure that would prevent this fraud.
(3 Points)

23.
The open purchase order file in the purchasing department is used to determine
(1 Point)

the quality of items a vendor ships

the best vendor for a specific item

the orders that have not been received

the quantity of items received

24.
Cost accounting updates work-in-process accounts from
(1 Point)

time cards

the labor distribution summary

job tickets

personnel action forms

25.
Which of following functions should be segregated?
(1 Point)

opening the mail and making the journal entry to record cash receipts

authorizing credit and determining reorder quantities

maintaining the subsidiary ledgers and handling customer queries

providing information on inventory levels and reconciling the bank statement

26.
When searching for unrecorded liabilities at the end of an accounting period, the
accountant would search all of the files except
(1 Point)

the purchase requisition file

the cash receipts file

the purchase order file

the receiving report file

27.
An advantage of real-time processing of sales is
(1 Point)

the cash cycle is lengthened

current inventory information is available

hard copy documents provide a permanent record of the transaction

data entry errors are corrected at the end of each batch

28.
The ability to achieve the goals of a system depends upon the effective functioning
and harmonious interaction between its subsystems. This is called
(1 Point)
system decomposition

system redundancy

backup system

subsystem interdependency
29.
Which document is not a type of source document?
(1 Point)

a sales order

an employee time card

a paycheck

a sales return receipt

30.
Personnel action forms are used to do all of the following except
(1 Point)

activate new employees

terminate employees

record hours worked

change pay rates
31.
Firms can expect that proper use of a valid vendor file will result in all of the
following benefits except
(1 Point)

purchasing agents will be discouraged from improperly ordering inventory from

related parties

purchases from fictitious vendors will be detected

the most competitive price will be obtained

the risk of purchasing agents receiving kickbacks and bribes will be reduced
32.
Which type of control is considered a compensating control?
(1 Point)

segregation of duties

access control

supervision

accounting records
33.
The characteristics that distinguish between batch and real-time systems include all
of the following except
(1 Point)
the cash cycle is lengthened

current inventory information is available

hard copy documents provide a permanent record of the transaction

data entry errors are corrected at the end of each batch

28.
The ability to achieve the goals of a system depends upon the effective functioning
and harmonious interaction between its subsystems. This is called
(1 Point)

system decomposition

system redundancy

backup system

subsystem interdependency
29.
Which document is not a type of source document?
(1 Point)

a sales order

an employee time card

a paycheck
a sales return receipt
30.
Personnel action forms are used to do all of the following except
(1 Point)

activate new employees

terminate employees

record hours worked

change pay rates

31.
Firms can expect that proper use of a valid vendor file will result in all of the
following benefits except
(1 Point)

purchasing agents will be discouraged from improperly ordering inventory from

related parties

purchases from fictitious vendors will be detected

the most competitive price will be obtained

the risk of purchasing agents receiving kickbacks and bribes will be reduced
32.
Which type of control is considered a compensating control?
(1 Point)
segregation of duties

access control

supervision

accounting records
33.
The characteristics that distinguish between batch and real-time systems include all
of the following except
(1 Point)

time frame

resources used

file format

efficiency of processing
34.
Depreciation
(1 Point)

is calculated by the department that uses the fixed asset

allocates the cost of the asset over its useful life

is recorded weekly

results in book value approximating fair market value

35.
The most cost-effective type of internal control is
(1 Point)

preventive control

accounting control

detective control

corrective control
36.
Which journal is not used in the revenue cycle?
(1 Point)

cash receipts journal

sales journal

purchases journal

general journal
37.
If a company uses a standard cost system, inventory records can be updated from
the
(1 Point)

vendor invoice
purchase order

receiving report

purchase requisition
38.
Which of the following is not an element of the internal control environment?
(1 Point)

management philosophy and operating style

organizational structure of the firm

well-designed documents and records

the functioning of the board of directors and the audit committee

39.
The cash disbursement clerk performs all of the following tasks except
(1 Point)

reviews the supporting documents for completeness and accuracy

prepares checks

signs checks

marks the supporting documents paid

40.
Good internal controls in the revenue cycle should ensure all of the following except
(1 Point)
all sales are profitable

all sales are recorded

credit is authorized

inventory to be shipped is not stolen

41.
Which of the following statements is not correct?
(1 Point)

the voucher system is used to improve control over cash disbursements

the sum of the paid vouchers represents the voucher payable liability of the firm

the voucher system permits the firm to consolidate payments of several invoices on
one voucher

many firms replace accounts payable with a voucher payable system

42.
The term “accounting independence” refers to
(1 Point)

data integrity

separation of duties, such as record keeping and custody of physical resources

generation of accurate and timely information

business segmentation by function

43.
Explain why supervision is so important in the receiving department.