Chapter 7 Flashcards
Internal Control- Purchase, Payroll, and other cycles
What does a debit memo indicate?
a deduction in the amount owed to a vendor because goods have been returned.
Effective control over the cash payroll function would mandate which?
Each employee should be asked to sign a receipt.
What should a questionnaire related to cash disbursements inquire about?
Whether:
1) Whether supporting documents is mutilated upon signing.
2) Issuing a check to cash or bearer is prohibited.
3) Signing blank checks is prohibited
4) unused checks are controlled.
5) voided checks are retained and accounted for.
6) The check signer is responsible for mailing signed checks.
To determine the effectiveness of an entity’s policies and procedures relating to the existence or occurrence assertion, what would the auditor most likely inquire about?
Proper segregation of duties.
Which is an essential element in the EDI system (EDI)?
Activity logs that indicate failed transactions.
What is an audit trail?
tracing from initiation to disposition.
What is a benefit of using electronic funds transfer for international cash transactions?
Reduction of the frequency of data entry errors.
To minimize the risk of agents in the purchasing department use of position for personal gain, the organization should…
Require competitive bidding.
This should reduce both cost and the likelihood that a purchasing agent will show favoritism to a vendor.
Should the custodian be separated from the treasury function as it relates to controls over securities and investments?
The custody of cash and securities should be placed with the treasury function.
CFO should have custody of treasury and investments.
Who should be responsible for mailing signed checks and remittance advices?
The employee that signs the check last.
Checks for disbursements should be signed by a responsible person in cash disbursement department after necessary supporting documents have been examined.
Appropriate controls over obsolete materials require that they be
determined by an approved authority to be unusable for their normal purposes
What should not be included in the copy of the purchase order sent to the receiving clerk?
Quantity of purchased items should not be included to ensure fair count.
Receiving clerk should count the items in the shipment, and prepare a receiving report. Copies are sent to inventory control and accounts payable.
The security of messages in the EDI system
Encryptions performed by physical secure hardware devices is more secure than encryption performed by software.
Parallel simulation is
a test of control in a clients application program.
An auditor-developed program is used to process actual client data, and the output and exceptions report is compared with those of the clients application program.
In a manufacturing environment, what is used to prepare payroll?
Time cards, the official record of time worked.
