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Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of a
A serious exposure for an organization that is connected with the revenue cycle is the loss of assets. What is the related threat and applicable control procedure association with this exposure?
theft of cash; segregation of duties and minimization of cash handling
What is the primary objective of the revenue cycle?
to provide the right product in the right place at the right time at the right price
A customer returns a document along with cash payment. The document identifies the source and the amount of the cash payment. It is called a
A company fails to bill customers due to a lack of controls. The exposure the company faces is
a loss of inventory and revenue.
Sad Clown Pajamas is an Internet-based wholesaler. The manager of Callow Youth Clothing received an order from Sad Clown and found that the wrong product had been shipped. He repackaged the order and sent it back for a refund. When it was received, he received a
Consider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat?
The company may be shipping the wrong merchandise. The company may be shipping the wrong quantities of merchandise. The company may be shipping orders to the wrong address.
A sales clerk at an electronics store scanned the bar code for a low cost set of headphones and then substituted a high cost set of headphones for his friend, who paid the lower price. Which of the following controls would help to prevent this sort of fraud?
Responding to customer inquiries and general customer service is an important aspect in the revenue cycle. Since customer service is so important, software programs have been created to help manage this function. These special software packages are called
The maximum allowable account balance for a given customer is called the
credit limit. How is credit approval generally handled for well-established customers with a documented payment history? routine approval is usually granted
Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is
egregation of duties.
Which of the following duties could be performed by the same individual and not violate segregation of duty controls?
handling cash receipts and mailing vendor payments
The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on forecasting demand for Sad Clown's products, will employ
materials requirements planning.
What is the key difference between the MRP and JIT inventory management approaches?
MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.
There are three basic activities in the expenditure cycle. One of the basic activities is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle?
the shipping function
The inventory management approach that attempts to minimize, if not eliminate, carrying and stockout costs is
a just-in-time inventory system
The threat of paying prices that are too high for goods ordered can pose a problem in the expenditure cycle. What is an appropriate control that would be applicable to help mitigate this threat?
use only approved suppliers and solicit competitive bids
The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new inventory control system. The current system is inadequate because it results in stockouts that interrupt production and excess stocks of some materials that result in markdowns and high carrying costs. The new system, which will focus on ensuring that orders are placed with sufficient lead time to prevent stockouts, will employ
a reorder point.
The disbursement voucher and supporting documents are sent to the ________ for payment prior to the due date
In the expenditure cycle, evaluated receipt settlement increases efficiency by
eliminating the need for vendor invoices.
A disbursement voucher contains
a list of outstanding invoices, the net payment amount after deducting applicable discounts and allowances, the general ledger accounts to be debited.
When a legacy system is replaced with an integrated Enterprise Resource Planning (ERP) system, many benefits are realized for the organization. What is a key improvement in the record keeping function?
Inventory records are more accurate and timely.
The receiving clerk at Folding Squid Technologies examines incoming shipments and checks their purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with the relevant purchase orders and invoices and payment is authorized. Which of the following would correct control weaknesses, if any, related to these activities?
Controls are adequate under the current system.
What is probably the most effective control for the prevention of kickbacks to purchasing agents?
a corporate policy to prohibit purchasing agents from accepting kickbacks
In a typical cash disbursement procedure, who usually handles the checks and may even be able to sign checks up to a certain dollar limit?
The receiving department has two major responsibilities in connection with the expenditure cycle. Identify one of these responsibilities.
deciding if the delivery should be accepted
Many companies use incentives and bonuses to motivate greater productivity and better quality work. An effective bonus/incentive system should incorporate realistic, attainable goals that can be objectively measured. What is not a desired result of an employee bonus/incentive system?
employees may recommend unnecessary services to customers in order to exceed set sales quotas and earn a bonus
The payroll master file is updated with
new hire and termination data as well as changes in pay rates and discretionary withholdings.
Some organizations outsource their payroll and/or HRM functions in an effort to reduce costs. A third party that maintains the payroll master file for each of its clients and processes payroll for them is called
a payroll service bureau.
This organization provides payroll as well as other HRM services such as employee benefit design and administration.
Professional employer organization
Regarding the use of incentives, commissions and bonuses in payroll, which of the following statements is false?
Using incentives, commissions, and bonuses requires linking the payroll system and the information systems of sales and other cycles in order to collect the data used to calculate bonuses; Bonus/incentive schemes must be properly designed with realistic, attainable goals that can be objectively measured; Poorly designed incentive schemes can result in undesirable behavior; All of the above are true
The document that lists each employee's gross pay, payroll deductions, and net pay in a multicolumn format is called
the payroll register.
This organization maintains the payroll master file for each of its clients and performs the payroll process.
Payroll service bureau
What step can be taken to reduce the distribution of fraudulent paychecks?
have internal audit investigate unclaimed paychecks
Which of the following will contribute to the efficiency of a payroll system?
Direct deposit of checks
Which of the following occurs nearest the start of the payroll cycle?
Disburse payroll taxes and miscellaneous deductions
A "zero balance check" refers to which of the following control procedures?
a payroll clearing account
In most companies the HRM/payroll cycle activities are accomplished by two separate systems. Which task below is typically not performed by an HRM system?
When updating the general ledger, sales, purchases, and production are examples of ________ entries, and issuance or retirement of debt and the purchase or sale of investment securities are examples of ________ entries.
accounting subsystem; treasurer originated
To support the strategic decision-making requirements of organizations, a separate database may be created and maintained. The name used for such a database depends on its size. What is the smaller version of such a database called?
a data mart
Which of the following is not one of the basic principles that make bar charts easy to read?
Use 3-D rather than 2-D bars to make reading easier.
The general ledger system of an organization should be designed to serve the information requirements of both financial and nonfinancial users. This means that the system should
support producing regular periodic reports and respond to real-time inquiry needs.
Immediately after the adjusting entries are completed, the next step in the general ledger and reporting system is to prepare
an adjusted trial balance.
Most budgets compare a standard budget amount to actual amounts that reflect the true performance of the organization. The budget standard is often a fixed target; however, given that these amounts are static, the budget does not account for unforeseen changes in the operating environment. A solution to this type of problem is to use a(n)
Which statement below about data warehouses and data marts is true?
A data warehouse or data mart complements the other databases within the organization by providing support for strategic decision making.
Which of the following tasks are accomplished by following the audit trail?
trace a transaction from original source document to the general ledger to a report, trace an item in a report back through the general ledger to the original source, and trace all changes in the general ledger from beginning to ending balances
Bobby Burns, CEO of Maudlin Motors, walked into the office of Tom Sanchez, chief information officer. "Tom," he said. "We have tons of data about customers, vendors, production, everything, but I don't think we're using it as well as we could. I'm thinking that we could analyze the data and try to find any patterns or relationships that would help us plan for the future." Tom should recommend that Maudlin Motors
implement a data mining operation
Business intelligence refers to the
use of data contained in a data warehouse for strategic planning.
Adjusting entries that reflect events that have already occurred but for which no cash flow has taken place and not previously entered into the accounts are called
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