Test 3

Question 1

What is the primary objective of the Revenue Cycle?

Answer 1

Provide the right product in the right place at the right time for the right price

Question 2

What is the primary objective of the Expenditure Cycle?

Answer 2

Minimize the total cost of acquiring and maintaining inventories, supplies, and the various services the organization needs to function

Question 3

What interfaces constantly with the revenue and expenditure cycles?

Answer 3

Production Cycle

Question 4

What are the general categories of functions that need to be separated in the Revenue Cycle?

Answer 4

Authorization function
Recording function
Custody of assets function

Question 5

What are the 4 basic revenue cycle activities?

Answer 5

Sales order entry
Shipping
Billing
Cash collections

Question 6

Describe the proper control for Incomplete or Inaccurate Customer Orders (REVENUE CYCLE 1)

Answer 6

Data entry edit controls

Restriction of access to master data

Question 7

Describe the proper control for Invalid Orders (REVENUE CYCLE 2)

Answer 7

Digital or written signature

Question 8

Describe the proper control for Uncollectible Accounts (REVENUE CYCLE 3)

Answer 8

Use credit limits

Specific authorization to approve sales to new customers or sales that exceed customer’s credit limit

Question 9

Describe the proper control for Stock Outs or Excess Inventory (REVENUE CYCLE 4)

Answer 9

Perpetual inventory system

Use bar codes or RFID

Question 10

Describe the proper control for Theft of Inventory (REVENUE CYCLE 5)

Answer 10

Restrict physical access to inventory

RFID or bar-code technology
Periodic physical counts of inventory and reconciliation to recorded quantities

Question 11

Describe the proper control for Purchasing Items Not Needed (EXPENDITURE CYCLE 1)

Answer 11

Perpetual inventory system

Review and approval of purchase requisitions
Centralized purchasing function

Question 12

Describe the proper control for Purchasing Goods of Inferior Quality (EXPENDITURE CYCLE 2)

Answer 12

Purchasing only from approved suppliers

Review and approval of purchases from new suppliers

Question 13

Describe the proper control for Unreliable Suppliers (EXPENDITURE CYCLE 3)

Answer 13

Requiring supplier to possess quality certification

Question 14

Describe the proper control for Kickbacks (EXPENDITURE CYCLE 4)

Answer 14

Prohibit acceptance of gifts from suppliers

Question 15

Describe the proper control for Purchasing From Unauthorized Suppliers (EXPENDITURE CYCLE 5)

Answer 15

Maintains a list of approved suppliers and configuring a system to permit purchase orders only to approved suppliers

Question 16

Describe the proper control for Theft of Fixed Assets (PRODUCTION CYCLE 1)

Answer 16

Periodic physical counts of inventory and reconciliation of those counts to recorded quantities

Question 17

Describe the proper control for Poor Performance (PRODUCTION CYCLE 2)

Answer 17

Performance reports and proper training

Question 18

Describe the proper control for Disruption of Operations (PRODUCTION CYCLE 3)

Answer 18

Backup and disaster recovery plans

Question 19

Describe the proper control for Inaccurate Cost Data (PRODUCTION CYCLE 4)

Answer 19

Source data automation

Question 20

Describe the proper control for Misleading Reports (PRODUCTION CYCLE 5)

Answer 20

Establish performance metrics (KPI’s)