Internal Control Quiz

Which document is not prepared by the sales department?

• packing slip

• shipping notice

• bill of lading

• stock release

Which document triggers the update of the inventory subsidiary ledger?

• bill of lading

• stock release

• sales order

• shipping notice

Which function should not be performed by the billing department?

• recording the sales in the sales journal

• sending the ledger copy of the sales order to accounts receivable

• sending the stock release document and the shipping notice to the billing department as proof of shipment

• sending the stock release document to inventory control

When will a credit check approval most likely require specific authorization by the credit department?

• when verifying that the current transaction does not exceed the customer’s credit limit

• when verifying that the current transaction is with a valid customer

• when a valid customer places a materially large order

• when a valid customer returns goods

Which type of control is considered to be a compensating control?

• segregation of duties

• access control

• supervision

• accounting records

Which of the following is not an output control?

• The shipping department verifies that the goods sent from the warehouse are correct in type and quantity.

• General ledger clerks reconcile journal vouchers that were independently prepared in various departments.

• The sales clerk uses pre-numbered sales orders.

• The billing department reconciles the shipping notice with the sales invoice to ensure that customers are billed only for the quantities shipped.

Which function or department below records the decrease in inventory due to a sale?

• warehouse

• sales department

• billing department

• inventory control

Which situation indicates a weak internal control structure?

• the AR clerk authorizes the write off of bad debts

• the record-keeping clerk maintains both AR and AP subsidiary ledgers

• the inventory control clerk authorizes inventory purchases

• the AR clerk prepares customer statements every month

The bill of lading is prepared by the

• sales clerk.

• warehouse clerk.

• shipping clerk.

• billing clerk.

Which of the following functions should be segregated?

• opening the mail and recording cash receipts in the journal

• authorizing credit and determining reorder quantities

• shipping goods and preparing the bill of lading

• providing information on inventory levels and reconciling the bank statement