Multiple copies of the purchase order are prepared for recordkeeping 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
Answer (B) is correct. The Accounts Payable Department should receive a copy of the purchase order for internal control purposes to ensure that all invoices paid are for properly authorized items. The Receiving Department should receive a copy (with the quantity omitted to encourage an honest count) so that its employees will know that incoming shipments were authorized and should be accepted. In addition, the department issuing the purchasing requisition (the Inventory Control Department) should receive a copy as a notification that the order has been placed.
Responsibility for following up on any problems regarding orders of production materials and supplies, such as orders for which no acknowledgment has been received, orders overdue, partial orders, damaged or substandard merchandise received on an order, etc., would be entrusted to the
Answer (D) is correct. The Purchasing Department is in the best position to follow up on purchase orders because it is the department closest to the vendors. In effect, the Purchasing Department is fully responsible for all communications with the vendor from the time a purchase order is issued until the goods are received.
The documents that the Accounts Payable Department must review before it can properly authorize payment for the purchase of materials and supplies are
Answer (D) is correct The Accounts Payable Department prepares a voucher from a vendor’s invoice only after examining supporting documents. These include a properly authorized purchase order and a receiving report stating quantities received and their condition.
One of the steps in assessing control risk in a computerized information control system is identifying necessary controls to prevent data from being lost, added, duplicated, or altered during processing. An example of this type of control is the
Answer (D) is correct. A control total is an application control that may consist of a count of the Comparison of the counts indicates whether all records have been processed or some have been added. A control total might also consist of a total of one information field for all records processed, such as the total sales dollars for a batch of sales invoices. A limit or reasonableness check tests whether the value of a field falls outside a prescribed range. The range may be stated in terms of an upper limit, lower limit, or both. The loss, addition, etc., of data may result in an unreasonable value. A sequence test verifies the ordering of records and may therefore detect various anomalies.
To control purchasing and accounts payable, an information system must include certain source documents. For a manufacturing organization, these documents should include
Answer (C) is correct. Before ordering an item, the purchasing department should have on hand a purchase requisition reflecting an authorized request by a user department. Before a voucher is prepared for paying an invoice, the accounts payable department should have the purchase requisition, a purchase order (to be certain the items were indeed ordered), the vendor’s invoice, and a receiving report (to be certain the items were received).
Which one of the following functions performed in an organization is a violation of sound principles of internal control?
Answer (C) is correct. Sound internal control requires that cash be deposited every day.
Which one of the following methods for the distribution of employees’ pay would provide the best internal control for the organization?
Answer (B) is correct. With direct deposit, the possibility of diversion of physical checks, either accidentally or fraudulently, is eliminated.
The new controller of a company is evaluating her department for proper segregation of duties. Evaluate the following statements and determine which set of duties is acceptable to be performed by the same employee while still maintaining proper segregation of duties.
Answer (B) is correct. In this arrangement, there is no issue with segregation of duties, as the employee is simply taking custody of the asset and does not authorize or record anything related to the situation.
Which one of the following represents a technique that is most appropriate for an internal auditor to use to test the effectiveness of accounting recordkeeping controls?
Answer (B) is correct. Comparing an internally created transaction with an external source will test the effectiveness of accounting recordkeeping controls. Checking with external sources to determine the transaction records’ accuracy aids in testing the effectiveness of accounting recordkeeping controls.
An Internet gaming company uses many laptops in its office and needs to ensure that they are adequately safeguarded. Which one of the following best represents a control that the company should use for its laptops?
Answer (C) is correct. Being able to identify the model and serial number for the laptops represents the best control in order to safeguard the laptops. This would provide protection against unauthorized access and use. In addition, each laptop computer could be easily identified by its unique serial number.