Internal Control - Transaction Cycle Flashcards
An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise. When vendors’ invoices arrive, one of the employees approves the invoices for payment.
After the invoices are paid, the employee destroys the invoices and the related vouchers.
In gathering evidence regarding the fraud, the auditor would most likely select items for testing from the file of all
Cash disbursements.
If the auditor is concerned that invoices and vouchers are being paid and destroyed, the most appropriate population for testing is cash disbursements.
The auditor would select a sample of inventory disbursements and trace to the vendor invoice, approved voucher, and receiving report.
T or F? To assure that all billed sales are correctly posted to the accounts receivable ledger, you need to start with the population of billed sales. The daily sales summaries will provide you with the population of billed sales. A comparison then of the daily sales summaries to the daily postings to the accounts receivable ledger will provide assurance that all billed sales are correctly posted to the accounts receivable ledger.
True
What control would most likely help ensure that all credit sales transactions of an entity are recorded?
The billing department supervisor matches prenumbered shipping documents with entries in the sales journal.
Tracing bills of lading to sales invoices provides evidence that
Shipments to customers were invoiced
Immediately upon receipt of cash, a responsible employee should
Prepare a remittance listing.
What internal control procedure is not usually performed in the vouchers payable department?
Accounting for unused prenumbered purchase orders and receiving reports.
Mailing disbursement checks and remittance advices should be controlled by the employee who
Signs the checks last.
When the shipping department returns nonconforming goods to a vendor, the purchasing department should send to the accounting department the
Debit memo
Which of the following is usually a benefit of using electronic funds transfer for international cash transactions?
Reduction of the frequency of data entry errors.
In a well-designed internal control structure, employees in the same department most likely would approve purchase orders, and also
Negotiate terms with vendors.
What internal control procedures is not usually performed in the treasurer’s department?
Approving vendors’ invoices for payment