Practice Multiple Choice Questions for Payroll, Sales and Collections, Acquisitions and Payment Processes

1. The internal auditor is reviewin shippin procedures of a manufacturin company. The auditor
should !e reatly concerned when
a. merchandise is shipped without an approved customer"s order.
b. invoiced prices on merchandise are not chec#ed !efore the orders are shipped.
c. the sales department is not promptly notified when merchandise is shipped.
d. only one quotation on transportation costs is o!tained.
e. transportation tariffs are not chec#ed !efore merchandise is shipped.
$. %hich of the followin is an effective internal accountin control over accounts receiva!le&
a. 'nly people who handle cash receipts should !e responsi!le for preparin documents that
reduce accounts receiva!le !alances.
!. (esponsi!ility for approval of the write off of uncollecta!le accounts receiva!le should
!e assined to the cashier.
c. )alances in the su!sidiary accounts receiva!le leder should !e reconciled to the eneral
leder control account once a year, prefera!ly at year end.
d. The !illin function should !e assined to people other than those responsi!le for
maintainin accounts receiva!le su!sidiary records.
*. %hich of the followin would !e the best protection for a company that wishes to prevent the
+lappin, of trade accounts receiva!le&
a. Sereate duties so that the !oo##eeper in chare of the eneral leder has no access to
incomin mail.
!. Sereate duties so that no employee has access to !oth chec#s from customers and
currency from daily cash receipts.
c. -ave customers send payments directly to the company"s depository !an#.
d. (equest that customers" payment chec#s !e made paya!le to the company and addressed
to the treasurer.
.. Matchin the supplier"s invoice, the purchase order, and the receivin report normally should !e the
responsi!ility of the
a. warehouse receivin function
!. purchasin function
c. eneral accountin function
d. treasury function
/. To avoid potential errors and irreularities, a well desined system of internal accountin control in the
accounts paya!le area should include a separation of which of the followin functions&
a. cash dis!ursements and vendor invoice verification
!. vendor invoice verification and merchandise orderin
c. physical handlin of merchandise received and preparation of receivin reports
d. chec# sinin and cancelation of payment documentation
0. 1t would !e appropriate for the payroll accountin department to !e responsi!le for which of the
followin functions&
a. approvin employee time records
!. maintainin records of employment, dischares, and pay increases
c. preparin periodic overnment reports as to employees" earnins and withholdin ta2es
d. temporarily retainin unclaimed employee paychec#s
3. 4ac#son, the purchasin aent of 4udd -ardware %holesalers, has a relative who owns a retail
hardware store. 4ac#son arraned for hardware to !e delivered !y manufacturers to the retail store on
a C.'.5. !asis, there!y ena!lin his relative to !uy at 4udd"s wholesale prices. 4ac#son was pro!a!ly
a!le to accomplish this !ecause of 4udd"s poor internal control over
a. purchase orders
!. purchase requisitions
c. cash receipts
d. perpetual inventory records
6. To determine whether the system of internal accountin control operated effectively to minimi7e
errors of failure to invoice a shipment, the auditor would select a sample of transactions from the
population represented !y the
a. customer order file
!. !ill of ladin file
c. open invoice file
d. sales invoice file
8. 9or effective internal accountin control, employees maintainin the accounts receiva!le su!sidiary
leder should not also approve
a. employee overtime waes
!. credit ranted to customers
c. write:offs of customer accounts
d. cash dis!ursements
1;. %hich of the followin departments should have the responsi!ility for authori7in payroll rate
chanes&
a. personnel
!. payroll
c. treasurer
d. time#eepin
11. %hich of the followin control procedures may prevent the failure to !ill customers for some
shipments&
a. <ach shipment should !e supported !y a prenum!ered sales invoice that is accounted for.
!. <ach sales order should !e approved !y authori7ed personnel.
c. Sales =ournal entries should !e reconciled to daily sales summaries.
d. <ach sales invoice should !e supported !y a shippin document.
1$. To achieve ood internal accountin control, which department should perform the activities of
matchin shippin documents with sales orders and preparin daily sales summaries&
a. !illin
!. shippin
c. credit
d. sales order
1*. %hich of the followin constitutes the most sinificant ris# within the purchasin cycle&
a. (eceivin department personnel sin receivin documents without inspectin or countin
oods.
!. >are quantities of relatively ine2pensive parts are stored in open areas near wor#stations
to reduce production slowdowns.
c. Poor records of transfers !etween warehouses often result in unnecessary purchases and
e2cess inventories.
d. %arehouse personnel do not compare quantities received to quantities shown on transfer
tic#ets.
1.. ?pon receipt of a requisition, the stores manaer initiates a three part purchase order. Two copies o
to the vendor and one copy stays in the stores file. ?pon receipt of the oods, the stores manaer
matches the purchase order with the invoice and forwards them to accounts paya!le for payment.
%hich of the followin statements !est descri!es the internal control over purchasin&
a. Adequate internal control e2ists.
!. 1nadequate separation of duties e2ists.
c. 1nadequate control over accounts paya!le e2ists.
d. 1nadequate control over the requisition process e2ists.
1/. Shippin documents should !e compared with sales records or invoices to
a. 5etermine whether payments are properly applied to customer accounts.
!. Assure that shipments are !illed to customers.
c. 5etermine whether unit prices !illed are in accordance with sales contracts.
d. Ascertain whether all sales are supported !y shippin documents.
10. An appropriate compliance test to confirm that only valid employees are on the payroll is to ensure that
a. Separate personnel folders are oriinated for each new employee.
!. Payroll chec#s are delivered directly to each supervisor !y the payroll cler#.
c. Personnel places names on payroll only on the !asis of written prenum!ered
authori7ations.
d. Payroll !an# accounts are reconciled monthly !y appropriate personnel.
13. %hich of the followin would !e the most appropriate test to determine whether purchase orders are
!ein processed on a timely !asis&
a. 5etermine the dates of unpaid accounts paya!le invoices.
!. Compare dates of selected purchase orders with those of purchase requisitions.
c. Select a !loc# of used purchase order num!ers and account for all num!ers in the !loc#.
d. 5iscuss processin procedures with operatin personnel and o!serve actual processin of
purchases.
16. As payments are received, one mailroom employee is assined the responsi!ility of prelistin receipts
and preparin the deposit slip prior to forwardin the receipts, deposit slip, and remittance advices to
accounts receiva!le for postin. Accounts receiva!le personnel refoot the deposit slip, stamp a
restrictive endorsement on the !ac# of each chec#, and then forward the receipts and deposit slip to the
treasury department. <valuate the internal control of the descri!ed process. %hich of the followin is
a reasona!le assessment of internal control in this process&
a. Adequate internal control.
!. 1nadequate internal control !ecause mailroom employees should not have access to cash.
c. 1nadequate internal control !ecause treasury employees should prepare the deposit slip.
d. 1nadequate internal control !ecause of a lac# of separation of duties.
18. %hich of the followin procedures, noted !y an auditor durin a preliminary survey of the payroll
function, indicates inadequate control&
a. All chanes to payroll data are documented !y the personnel department on authori7ed
chane forms.
!. Prior to distri!ution, payroll chec#s are verified to a computer produced payroll reister.
c. A separate payroll !an# account is used and payroll chec#s are sined !y the treasurer
and distri!uted !y personnel from the treasurer"s office.
d. All unclaimed payroll chec#s are returned to the payroll cler# for disposition.
$;. %hich of the followin internal control procedures will most li#ely prevent the concealment of a cash
shortae resultin from the improper write:off of a trade accounts receiva!le&
a. %rite offs must !e approved !y a responsi!le officer after review of credit department
recommendations and supportin evidence.
!. %rite offs must !e supported !y an ain schedule showin that only receiva!les overdue
several months have !een written off.
c. %rite offs must !e approved !y the cashier who is in a position to #now if the receiva!les
have, in fact, !een collected.
d. %rite offs must !e authori7ed !y company field sales employees who are in a position to
determine the financial standin of the customers.
$1. 9or the purpose of proper accountin control, postdated chec#s remitted !y customers should !e
a. restrictively endorsed
!. returned to the customer
c. recorded as a cash sale
d. placed in the =oint custody of two officers
$$. Proper internal control over the cash payroll function would mandate which of the followin&
a. The payroll cler# should fill the envelopes with cash and a computation of the net waes.
!. ?nclaimed pay envelopes should !e retained !y the paymaster.
c. <ach employee should !e as#ed to sin a receipt.
d. A separate chec#in account for payroll should !e maintained.
$*. A company policy should clearly indicate that defective merchandise returned !y customers is to !e
delivered to the
a. sales cler#
!. receivin cler#
c. inventory control cler#
d. accounts receiva!le cler#
$.. A CPA reviews a client"s payroll procedures. The CPA would consider internal control to !e less than
effective if a payroll department supervisor was assined the responsi!ility for
a. reviewin and approvin time reports for su!ordinate employees.
!. distri!utin payroll chec#s to employees.
c. hirin su!ordinate employees.
d. initiatin requests for salary ad=ustments for su!ordinate employees.
$/. To conceal defalcations involvin receiva!les, the auditor would e2pect an e2perienced !oo##eeper to
chare which of the followin accounts&
a. miscellaneous income
!. petty cash
c. miscellaneous e2pense
d. sales returns
$0. The most li#ely result of ineffective internal control policies and procedures in the revenue cycle is
that
a. irreularities in recordin transactions in the su!sidiary accounts could result in a delay in
oods shipped.
!. omission of shippin documents could o undetected, causin an understatement of
inventory.
c. final authori7ation of credit memos !y personnel in the sales department could permit an
employee defalcation scheme.
d. ficititious transactions could !e recorded, causin an understatement of revenues and
overstatement of receiva!les.
$3. Proper authori7ation procedures in the revenue cycle usually provide for the approval of !ad de!t write
offs !y an employee in which of the followin departments&
a. treasurer
!. sales
c. !illin
d. accounts receiva!le
$6. 1nternal accountin control is strenthened when the quantity of merchandise ordered is omitted from
the copy of the purchase order sent to the
a. department that initiated the requisition
!. receivin department
c. purchasin aent
d. accounts paya!le department
$8. %hich of the followin controls would !e most effective in assurin that recorded purchases are free of
material errors&
a. The receivin department compares the quantity ordered on purchase orders with the
quantity received on receivin reports.
!. @endors" invoices are compared with purchase orders !y an employee who is independent
of the receivin department.
c. (eceivin reports require the sinature of the individual who authori7ed the purchase.
d. Purchase orders, receivin reports, and vendors" invoices are independently matched in
preparin vouchers.
*;. The purpose of sereatin the duties of hirin personnel and distri!utin payroll chec#s is to separate
the
a. administrative controls from the internal accountin controls.
!. human resources function from the controllership function.
c. operational responsi!ility from the record#eepin responsi!ility.
d. authori7ation of transactions from the custody of related assets.
*1. %hen oods are received, the receivin cler# should match the oods with the
a. purchase order and the requisition form
!. vendor"s invoice and the receivin report
c. vendor"s shippin document and the purchase order
d. receivin report and the vendor"s shippin document
*$. Tracin !ills of ladin to sales invoices provides evidence that
a. shipments to customers were invoiced
!. shipments to customers were recorded as sales
c. recorded sales were shipped
d. invoiced sales were shipped
**. <ffective internal control procedures over the payroll function may include
a. (econciliation of totals on =o! time tic#ets with =o! reports !y employees responsi!le for
those specific =o!s.
!. @erification of areement of =o! time tic#ets with employee cloc# card hours !y a payroll
department employee.
c. Preparation of payroll transaction =ournal entries !y an employee who reports to the
supervisor of the personnel department.
d. Custody of rate authori7ation records !y the supervisor of the payroll department.
*.. 9or internal control purposes, which of the followin individuals should prefera!ly !e responsi!le for
the distri!ution of payroll chec#s
a. !oo##eeper
!. payroll cler#
c. cashier
d. receptionist
*/. A sales cler# at Schac#ne Company correctly prepared a sales invoice for A/,$;;, !ut the invoice was
entered as A$,/;; in the sales =ournal and similarly posted to the eneral leder and accounts
receiva!le leder. The customer remitted only A$,/;;, the amount on hisBher monthly statement. The
most effective procedure for preventin this type of error is to
a. ?se predetermined totals to control postin routines.
!. -ave an independent chec# of sales invoice serial num!ers, prices, discounts, e2tensions,
and footins.
c. -ave the !oo##eeper prepare monthly statements that are verified and mailed !y a
responsi!le person other than the !oo##eeper.
d. -ave a responsi!le person who is independent of the accounts receiva!le department
promptly investiate unauthori7ed remittance deductions made !y customers or other
matters in dispute.
*0. 9or ood internal control, the !illin department should !e under the direction of the
a. controller
!. credit manaer
c. sales manaer
d. treasurer
*3. The authority to accept incomin oods in receivin should !e !ased on aCanD
a. vendor"s invoice
!. materials requisition
c. !ill of ladin
d. approved purchase order
*6. %hich of the followin controls most li#ely would !e effective in offsettin the tendency of sales
personnel to ma2imi7e sales volume at the e2pense of hih !ad de!t write offs&
a. <mployees responsi!le for authori7in sales and !ad de!t write offs are denied access to
cash.
!. Shippin documents and sales invoices are matched !y an employee who does not have
authority to write off !ad de!ts.
c. <mployees involved in the credit rantin function are separated from the sales function.
d. Su!sidiary accounts receiva!le records are reconciled to the control account !y an
employee independent of the authori7ation of credit.
*8. %hich of the followin controls most li#ely would help ensure that all credit sales transactions of an
entity are recorded&
a. The !illin department supervisor sends copies of approved sales orders to the credit
department for comparison to authori7ed credit limits and current customer account
!alances.
!. The accountin department supervisor independently reconciles the accounts receiva!le
su!sidiary leder to the accounts receiva!le control account monthly.
c. The accountin department supervisor controls the mailin of monthly statements to
customers and investiates any differences reported !y customers.
d. The !illin department supervisor matches prenum!ered shippin documents with entries
in the sales =ournal.
.;. %hich of the followin procedures most li#ely would !e considered a wea#ness in an entity"s internal
controls over payroll&
a. A voucher for the amount of the payroll is prepared in the eneral accountin department
!ased on the payroll department"s payroll summary.
!. Payroll chec#s are prepared !y the payroll department and sined !y the treasurer.
c. The employee who distri!utes payroll chec#s returns unclaimed payroll chec#s to the
payroll department.
d. The personnel department sends employees" termination notices to the payroll
department.
Answer EeyF
1. A 3. A 1*. A 18. 5 $/. 5 *1. C *3. 5
$. 5 6. ) 1.. ) $;. A $0. C *$. A *6. C
*. C 8. C 1/. ) $1. A $3. A **. ) *8. 5
.. C 1;. A 10. 5 $$. C $6. ) *.. 5 .;. C
/. A 11. A 13. ) $*. ) $8. 5 */. A
0. C 1$. A 16. 5 $.. ) *;. 5 *0. A