Internal Control - Purchases, Payroll, and Other Cycles SU 7 Flashcards
What is a standard control related to the completeness assertion for purchases?
The use of prenumbered documents. Purchase ORDERS, receiving reports, and VOUCHERS should be prenumbered and periodically accounted for.
What is the greatest risk regarding the use of EDI (electronic data interchange)?
Improper distribution of transactions.
When is a voucher complete for payment?
When the invoice has been matched with the corresponding purchase order, receiving report, and often the requisition.
Responsibilities of the CFO include:
Being the custodian of assets: custody of cash and securities
Establishing credit policies
Describe the types of data input processing controls
Validity test: transactions contain valid transaction codes
Completeness test: Input has prescribed amount of data in all data fields
Control total: Used to reconcile input to source document totals
Limit test: Determines if data exceeds predetermined limits
Which internal control activities are performed in the CFO’s department?
Controlling the mailing of checks to vendors
Verifying the accuracy of checks and vouchers
Canceling payment vouchers when paid
When an auditor vouches a sample of entries in the voucher register to supporting documents, which assertion is being supported?
Occurrence: voucher represents a liability; vouching samples of recorded entries to supporting documentation provide evidence that the transactions occurred
The authority to accept goods in receiving should be based on:
An approved purchase order
What duties are assigned to the accounts payable (vouchers payable) clerk?
Matches purchase orders, invoices, receiving reports
Tests the calculations and terms on the invoices
Prepares disbursement voucher
Compare vendor invoice with purchase order to determine that terms and prices are correct
Compare vendor invoice with receiving report to determine that the quantity received was the quantity ordered
What are the duties of cash disbursements?
Signs checks after evaluating supporting documents
Reports the CFO and mails the checks
Cancels payment documents to prevent duplicate vouchers and checks
What documents are needed for accounts payable to prepare the voucher?
Requisition, purchase order, receiving report, and invoice
Once these are matched, a voucher is prepared
What is a function that is incompatible with being the payroll department supervisor?
Authorizing payroll rates changes for all employees
Payroll should be independent of human resources
HR is responsible for authorizing rate changes
What are the duties of inventory control?
Provide authorization for the purchase of goods
Performs an accountability function
Maintains the records of inventory received and shipped
When inventory falls below a reorder point, a purchase requisition is issued
What controls are provided by a preformatted screen?
It is used to ensure proper input
Transaction won’t be approved until all fields are completed
Which control will prevent paying for goods not received if performed prior to invoice payment?
Vendor invoices being approved by a departmental supervisor other than the employee ordering the goods
