Need help with these 33 multiple choice questions for Accounting Information Systems

1. A treasurer inadvertently transposed two digits in the debit amount when entering a journal entry to record issuance of a new debt. Which of the following control procedures might best mitigate this threat? a. Check digit verification b. Validity check c. Pre-number journal vouchers d. Cross-footing balance check 2. Management implements a control procedure to hold the purchasing manager responsible for the costs of scrap and rework. This is done to mitigate the threat of: a. Purchasing goods at inflated prices b. Preventing stock out or excess inventory c. Purchasing goods of inferior quality d. Purchasing goods from unauthorized suppliers 3. Which of the following is an example of an input control? a. Having another person review the design of a business form b. Making sure that output is distributed to the proper people c. Recalculating an amount to ensure its accuracy d. Collecting accurate statistics of historical transactions while gathering data e. Monitoring the work of programmers 4. Which of the following control procedures might best mitigate the threat of failure to bill customers? a. Periodic reconciliation of bank statement with records by someone not involved in cash receipts processing b. Prenumbering of all shipping documents and periodic reconciliation with invoices c. Data entry application controls d. Reconciliation of subsidiary accounts receivable ledger with general ledger 5. According to the company's policy, all transfers of inventory must be properly documented. This control procedure is implemented to minimize the problem of: a. Kickbacks b. Receiving unordered goods c. Paying for goods not received d. Theft of inventory 6. Which of the following tasks should the cash disbursements clerk not perform? a. Prepare checks b. Mark the supporting documents paid c. Approve the liability d. Review the supporting documents for completeness and accuracy 7. When certain customers make cash payments to reduce accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity? a. Segregation of duties b. Accounting records c. Accounting system d. Access controls 8. Firms can expect that proper use of valid vendor file will result in all of the following benefits, except: a. The most competitive price will be obtained b. The risk of purchasing agents receiving kickbacks and bribes will be reduced c. Purchases from fictitious vendors will be detected d. Purchasing agents will be discouraged from improperly ordering inventory from related parties 9. Which of the following control procedures might best mitigate the threat of incomplete or inaccurate customer orders? a. Data transmission controls b. Logical access controls c. Data entry edit checks d. Send monthly statements to customers 10. Which of the following functions should be segregated? a. Providing information on inventory levels and reconciling the bank statement b. Opening the mail and making the journal entry to report cash receipts c. Authorizing credit and determining reorder quantities d. Maintaining subsidiary ledgers and handling customer queries 11. Which of the following is not a source of evidence for an external auditor? a. Test of controls b. Work performed by internal auditors who report to the audit committee of the board of directors c. Substantive tests d. Work performed by internal auditors who organizationally report to the controller 12. A human resources director, responsible for hiring employees, credited employees for hours not worked and then received a kickback of 50% of their extra compensation. He also added fictitious names to the payroll and cashed the paychecks. Which of the following sets of duties, if properly separated, will best mitigate the problem? a. Authorization and custody b. Recording and authorization c. Custody and recording d. Authentication and authorization 13. The reconciliation that occurs in the shipping department is intended to ensure that: a. The customer is billed for the exact quantity shipped b. Credit has been approved c. The goods shipped match the goods ordered d. Inventory records are reduced for the goods shipped 14. Which of the following best describes the purpose of matching all invoices to the corresponding receiving reports and purchase orders? a. Prevent payment of fictitious invoices b. Verify that items were ordered from vendors on the approved vendor list c. Verify that the items received were placed in inventory d. Prevent large disbursements for questionable reasons 15. The open purchase order file in the purchasing department is used to determine: a. The best vendor for a specific item b. The orders that have not been received c. The quality of items a vendor shipped d. The quantity of items received 16. Which of the following is not an element of the internal control environment? a. Organizational structure of the firm b. The functioning of the board of directors and the audit committee c. Management philosophy and operating style d. Well-designed documents and records 17. Which of the following is not a potential exposure of the financial reporting system? a. General ledger accounts b. Unauthorized access to the check register c. Unauthorized access to the general ledger d. A defective audit trail 18. Which documents would an auditor most closely choose to examine closely to ascertain that all expenditures incurred during the accounting period have been recorded as a liability? a. Invoices b. Purchase requisitions c. Purchase orders d. Receiving reports 19. Which of the following is an example of a preventative control? a. A clerk is responsible for performing monthly bank reconciliations b. An internal auditor recomputes batch totals and reconciles the input totals with the output totals c. All employees must enter their codes using the numeric keypad prior to entry to a computer that houses highly sensitive programs and data files d. An employee is required to follow procedures to rectify data entry errors and resubmit transactions for reprocessing 20. An insurance claims adjuster had possession of the check signing machine and check signing authority for amounts below $10,000. This employee created 5 companies that subsequently billed the insurance company for work not performed on legitimate insurance claims, and signed the checks to pay for the invoices. These invoices never exceeded $10,000. This problem might be mitigated if the following duties are segregated: a. Authorization, custodial b. Custodial, recording c. Authorization, custodial, and recording d. Recording, authorization 21. According to the SAS 78, an effective accounting system performs all of the following except: a. Records all financial transactions promptly b. Identifies and records all valid financial transactions c. Records financial transactions in the appropriate accounting period d. Separates the duties of data entry and report generation 22. Which statement is not correct for an expenditure system with proper internal controls? a. Accounts payable is responsible for authorizing invoices b. Accounts payable maintains the accounts payable subsidiary ledger c. Accounts payable is responsible for paying invoices d. Cash disbursements maintains the check register 23. Internal controls for handling sales returns and allowances do not include: a. Using the original sales invoice to prepare the sales return slip b. Computing bad debt expense using the percentage of credit sales c. Authorizing the credit memo by management d. Verifying that goods have been returned 24. An employee of the finishing department walked off with several parts from the storeroom and entered the items as having been issued to the assembly department. Which one of the following pairs of functions should be separated to mitigate the risk of theft? a. Authorization and recording b. Authentication and authorization c. Recording and custody d. Custody and authorization 25. Which of the following indicates a strong internal control environment? a. There are questions about the integrity of management b. The internal audit group reports to the audit committee of the board of directors c. Adverse business conditions exist in the industry d. There is no segregation of duties between organization functions 26. Which of the following controls would best prevent the lapping of accounts receivable? a. Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger b. Request that customers make checks payable to the company c. Require customers to send payments directly to the company's bank d. Request that customers review their monthly statements and report any unrecorded cash payments 27. Which of the following control procedures might best mitigate the problem of errors in counting goods received? a. Require receiving dock employees to verify existence of valid purchase orders b. Implement data entry and processing edit controls c. Implement bar-code technology d. Periodic review of appropriate reports 28. Which situation indicates a weak internal structure? a. The mailroom clerk authorizes credit memos b. The account receivable clerk prepares customer statements every month c. The warehouse clerk obtains a signature before releasing goods for shipment d. The record-keeping clerk maintains both accounts receivable and accounts payable subsidiary ledgers 29. Which of the following is not an internal control procedure? a. Authorization b. Accounting records c. Independent verification d. Management's operating style 30. Who is responsible for establishing and maintaining the internal control system? a. The external auditor b. The accountant c. Management d. The internal auditor 31. Which of the following situations is not a segregation of duties violation? a. The department time clerk is given the undistributed payroll checks to mail to absent employees b. The sales manager has the responsibility to approve credit and the authority to write off accounts c. The accounting clerk who shares the record-keeping responsibility for the accounts receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger and the control account d. The warehouse clerk, who has custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low e. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. 32. Which type of control is considered a compensating control? a. Access control b. Accounting records c. Supervision d. Segregation of duties 33. The most effective internal control procedure to prevent or detect the creation of fictitious credit memos for sales returns is to: a. Supervise the accounts receivable department b. Require management approval for all credit memos c. Limit access to credit memoranda d. Prenumber and sequence check all credit memoranda