Expenditure Cycle Flashcards
To accomplish the objectives set forth in the expenditure cycle, a number of key management decisions must be addressed. Which of the decision below is not ordinarily found as part of the expenditure cycle?
A. How can cash payments to vendors be managed to maximize cash flow?
B. What is the optimal level of inventory and supplies to carry on hand?
C. Where should inventories and supplies be held?
D. What are the optimal prices for each product or service?
D
One of the basic activities in the expenditure cycle is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle?
A. Sales order entry process
B. Shipping function
C. Cash collection activity
D. Cash payments activity
B
Which of the following is not an activity performed in the expenditure cycle?
A. Ordering
B. Receiving
C. Cash disbursement
D. Shipping
D
The first major business activity in the expenditure cycle is
ordering inventory, supplies or services
Identify 5 threats and applicable control procedures in the expenditure cycle.
- Theft
- Loss of purchase during shipment
- Failure to pay vendors
- Purchasing goods not needed
- Errors in received goods
- Purchasing from unauthorized vendors
Which of the following controls can minimize the threat of mistakes in counting incoming inventory?
A. the use of positive pay
B. do not inform receiving employees about quantity ordered
C. the use of ERS
D. perpetual inventory system
B
What is the best control to mitigate the threat of paying prices that are too high for goods ordered?
A. Require the receiving department to verify the existence of a valid purchase order
B. use only approved suppliers and solicit competitive bids
C. only pay invoices that are supported by the original voucher package
D. use bar-code technology to eliminate entry errors
B
Restricting access to approved supplier list can
A. help reduce the risk of fraudulent disbursements
B. cause purchase order approval delays
C. eliminate the risk of duplicate payment
D. improve the efficiency of the expenditure cycle
A
Which of the following is generally not shown on a receiving report?
A. price of items
B. quantity of the items
C. purchase order number
D. counted and inspected by
A
What is the best way to prevent the acceptance of goods that were never ordered?
A. order only from approved vendors
B. enforce an appropriate conflict of interest policy in place
C. Match the packaging slip to a purchase order before accepting delivery
D. require specific authorization from the purchasing manager before accepting any goods
C
What is a purchase requisition?
Is a formal request for an organization to purchase goods or services.
What control would best mitigate the threat of paying an invoice twice?
A. never authorizing payment of a photocopy of an invoice
B. double-checking mathematical accuracy of invoices
C. approval of purchase orders
D. maintaining adequate perpetual inventory
A
which control would best prevent payments made to fictious vendors?
A. allow payments only to approved vendors
B. restrict access to any payment or approval documents
C. have an independent bank reconciliation
D. have make sure all documents are in order before approving payments
A
Which of the following is a weakness in accounts payable procedures?
A. The accounts payable clerk files invoices and supporting documentation after payment
B. The accounts payable manager issues purchase orders
C. the accounts payable system compares the receiving report to the vendor invocie
D. the accounts payable clerk manually verifies arithmetic on the vendor invoice
B (They record, can lead to fraud)
What is a voucher?
A document used by A/P to prove that you actually owe the payable (in the expenditure cycle)
