Quiz 3 Purchase/ Accounts Payable & Cash Disbursement System

Which department monitors various supply sources and choose the highest quality good for a given price that can be reliably delivered on-time. They may also take advantage of quantity discounts, especially when two or more manufacturing facilities are involved.

• Receiving Department
• Inventory Control Department
• Purchasing Department
• Cash Disbursement Department

Which of the following is not a logical step on cash disbursement system?

• authorization of cash disbursements for payment
• identify payables that are due and reviews the supporting document prior to sending the approval for payment
• preparation and distribution of checks
• preparation of summary information by cash disbursements and accounts payable, which are sent to the general ledger clerk

Which control procedure helps to deter the purchasing agent from buying inventories at excessive costs and receiving kickbacks, or from buying from an entity in which the purchasing agent has a relationship, such as a relative or a friend?

• Inventories are acquired only from valid vendors file
• Segregation of Accounts Payable Department from Cash Disbursement Department
• Blind copy of purchase order used by the Receiving Department
• Verification made by Accounts Payable Department prior to recording accounts payable

Which of the following is correct regarding the automation of three-way match?

• System can create a virtual AP packet by linking the vendor invoice to the associated PO and receiving report, using the PO number as a common attribute.
• System reconciles the supporting documents, using programmed criteria for assessing discrepancies.
• Discrepancies in excess of the threshold are submitted by the system to appropriate approving authority for review and manual approval.
• Through the virtual AP packet screen, management may view the supporting documents and exercise an override of the system controls to force payment.
• All of the above

It means achieving segregation of duties in an integrated data processing environment where multiple users simultaneously access a common central application.

• Independent verification
• Multi-level security
• Segregation of organizational duties
• Bidding process

What risk can a three-way-match (PO vs Vendor Invoice vs Receiving report) performed by AP Clerk addresses?

• The organization may pay for items that it did not order since the liability is set-up based only on the Invoice and the Receiving Report.
• The organization may receive and accept incorrect item types and /or quantities of items.
• Unnecessary purchases of inventory may occur and the potential for kick back fraud exists under the current system.
• Misappropriation of cash through vendor fraud.

Which of the following is incorrect regarding controls over the Purchasing and Disbursement process?

• If transactions cannot be traced to a formal authorization, then purchases without authorization could be processed.
• Receiving clerk should use blind copy of PO to count and inspect, not the packing slip.
• Passwords should not be changed to ensure access to supporting documents and reports.
• Periodic back-up of data should be performed as business continuity measure.

Which of the following is considered as an organizational or physical control?

• Inventory warehouse clerk should not also have responsibility for updating inventory sub ledger.
• Access control lists and role-bases access controls
• Error messages to signify account or information mismatch
• Password control to prevent unauthorized access to the system

Which of the following is incorrect?

• The risk of misappropriation can be mitigated by having the internal auditor make periodic unannounced counts of the fund balance and vouchers and by holding the person in charge of the petty cash fund accountable for any shortages discovered during those surprise audits.
• Access to the approved supplier list should be unrestricted, and any changes to that list should be carefully reviewed and approved.
• ERP system should be configured to automatically flag discrepancies between receiving counts and order quantities that exceed a predetermined tolerance level so that they can be promptly investigated
• Receiving department to accept only deliveries for which there is an approved purchase order.

Which of the following is considered not a risk or threat that can emanate from cash disbursement process?

• Check alteration
• Theft or misappropriation of funds
• Duplicate payments
• Keystroke-logging software (could infect the computer used for online banking and provide criminals with the organization’s banking credentials)
• All of the statements provided