Risk and Control Expenditure Cycle Part 1

What is the primary risk of unauthorized inventory purchases?

• Loss of customer orders

• Excessive inventory levels or stock-outs

• Overpayment to suppliers

• Delayed accounts payable payments

What physical control helps ensure that only valid transactions are processed in the purchasing function?

• Segregation of duties

• Transaction authorization

• Supervision

• Independent verification

What IT control prevents unauthorized purchases from unapproved vendors?

• Automated purchase approval

• Segregation of duties

• Access control

• Independent verification

What document is used in the receiving department to verify the type and quantity of received items?

• Invoice

• Blind purchase order

• Purchase requisition

• Check register

What is the role of supervision in the receiving process?

• To ensure clerks properly count and inspect goods

• To authorize payments to suppliers

• To maintain the inventory control system

• To approve the purchase order

What IT control helps reduce human error in verifying received goods?

• Error messages

• Scanner technology

• Independent verification

• File backup

Which of the following is an example of inaccurate record-keeping?

• Recording accounts payable in the correct period

• Posting vendor cash payments to the wrong account

• Using a blind purchase order

• Conducting independent verification

Which physical control ensures that cash disbursements are properly authorized?

• Segregation of duties

• Supervision

• Transaction authorization

• Password control

What IT control is designed to detect data entry errors such as transposed digits?

• Independent verification

• Input data edits

• File backup

• Access control

Why are error messages important in an IT system?

• They ensure physical records are maintained properly

• They alert users when there is a mismatch in vendor or inventory records

• They automatically process transactions

• They replace the need for independent verification