IS 414 CH. 13 (System and Threats)

Question 1

What are the 4 systems of the Expenditure cycle?

Answer 1

1. Ordering materials, supplies, and services
2. Receiving materials, supplies, and services
3. Approving supplier invoices
4. Cash disbursements

Question 2

Ordering Materials, Supplies, and Services

Answer 2

1. Identifying what, when, and how much to purchase

2. Choosing suppliers

Question 3

Identifying what, when, and how much to purchase

Answer 3

5. Stockouts and excessive inventory
6. 1 Perpetual inventory system
7. 2 Bar coding or RFID tags (eliminate need for manual entry)
8. 3 Periodic physical count of inventory
9. Purchasing items not needed
10. 1 Perpetual inventory system
11. 2 Review and approval of purchase requisition
12. 3 Centralized purchasing function (only one person orders so it won’t cause multiple orders of the same item)

Question 4

2. Choosing suppliers

Answer 4

7. Purchasing at inflated prices
8. 1 Price lists for frequently purchased items should be stored in the computer and consulted when orders are made
9. 2 Competitive bidding
10. 3 Review of purchase orders (to make sure policies have been followed)
11. 4 Budgets
12. Purchasing good of inferior quality
13. 1 Purchasing only from approved suppliers
14. 2 Review and approval of purchases from new suppliers
15. 3 Tracking and monitoring quality by supplier
16. 4 Holding purchasing managers responsible for rework and scrap costs
17. Unreliable suppliers
18. 1 Requiring suppliers to possess quality certification
19. 2 Collecting and monitoring supplier delivery performance data
20. Purchasing from unauthorized suppliers
21. 1 Maintaining list of approved suppliers and configuring the system to permit purchase orders only to approved vendors
22. 2 Review and approval of purchases from new suppliers
23. 3 EDI-specific controls (access, review of orders, encryption, and policy)
24. Kickbacks
25. 1 Prohibit acceptance of gifts from suppliers
26. 2 Job rotation and mandatory vacations
27. 3 Requiring purchasing agents to disclose financial and personal interests in suppliers
28. 4 Supplier audits

Question 5

Receiving materials, supplies, and services

-Receive goods

Answer 5

12. Accepting ordered items
13. 1 Requiring existence of approved purchase order prior to accepting any delivery
14. Mistakes in counting
15. 1 Do no inform receiving employees about quantity ordered
16. 2 Require receiving employees to sign receiving report
17. 3 Incentives
18. 4 Use of bar codes and RFID
19. 5 Configuration of the ERP system to flag discrepancies between received and ordered quantities that exceed tolerance threshold for investigation
20. Verifying receipt of services
21. 1 Budgetary controls
22. 2 Audits

Question 6

Transfer goods to inventory stores or departments

Answer 6

15. Theft of inventory
16. 1 Restriction of physical access to inventory
17. 2 Documentation of all transfers of inventory between receiving and inventory employees
18. 3 Periodic physical counts of inventory and reconciliation to recorded quantities
19. 4 Segregation of duties: custody of inventory vs receiving

Question 7

Approving Supplier invoices

Answer 7

16. Errors in supplier invoices
17. 1 Verification of invoice accuracy
18. 2 Requiring detailed receipts
19. 3 ERS
20. 4 Restriction of access to supplier master data
21. 5 Verification of freight bill and use of approved delivery channels
22. Mistakes in posting to accounts payable
23. 1 Data entry controls
24. 2 Reconciliation of detailed A/P records with the general ledger control account

Question 8

Cash disbursements

Answer 8

18. Failure to take advantage of discounts for prompt payments
19. 1 Filing of invoices by due date for discounts
20. 2 cash flow budgets
21. Paying for items not received
22. 1 Requiring that all supplier invoices be matched to supporting documents that are acknowledged by both receiving and inventory control
23. 2 Budgets (for services) [red flags]
24. 3 Requiring receipts for travel expenses
25. 4 Use of corporate credit cards for travel expenses
26. Duplicate payments
27. 1 Requiring complete voucher package for all payments
28. 2 Policy to pay only from original copies of supplier invoice
29. 3 Cancelling all supporting documents when payment is made

Question 9

Cash disbursements

Answer 9

21. Theft of cash
    21.1
    21.2
    21.3
    21.4
    21.5
    21.6
    21.7
    21.8
    21.9
    21.10
    21.11
    21.12
    check book pg. 385