Worksheets[A] Chapter 6+7+8
Total questions: 60
Worksheet time: 3600secs
Which three of the following are risks associated with the sales system?
Orders may be taken from customers who are not able to pay
Goods may be despatched but not invoiced
The full credit period offered might not be taken
Money might be received at the premises but not banked
Which two of the following controls best mitigate the risk that customers might not be able to pay
Authorisation of credit terms to customers
Obtaining customers' signatures on delivery documentation
Regular preparation of trade receivables statements
Checking the ageing of the current receivables ledger balance before to accepting orders
Orders are placed by telephone. When a call is received, the person receiving the order checks the customer's credit status and that the customer's current balance is below the maximum level, checks that the item is in inventory, and then immediately inputs the order into the system
Strength
Deficiency
The order automatically generates a message to the distribution centre which despatches the goods and to the accounts department, which immediately raises an invoice and sends it to the customer.
Strength
Deficiency
Customer queries are dealt with by reception staff
Strength
Deficiency
1. Recording sales and access to remittances from customers
2. Credit control and invoicing
TT
FF
TF
FT
Overdue accounts are not followed up
Invoiced sales might not be properly recorded
Credit notes might not be properly recorded
Debts might be included on the receivables ledger that are not collectable
Invoices are not in numerical sequence
Invoiced sales might not be properly recorded
Credit notes might not be properly recorded
Debts might be included on the receivables ledger that are not collectable
Which two of the following are risks associated with the sales system?
Orders may be taken from customers who are not able to pay
Invoices may be cancelled by valid credit notes
Goods may be received but not invoiced
Sales might be recorded in the wrong customer accounts
Assuming that all controls are operating effectively, which one of the following control procedures is most likely to ensure that customers are invoiced for goods despatched?
Use of pre-printed sequentially numbered sales order documentation
Matching of sales orders with despatch records
Matching of despatch records with sales invoices
Requiring customers to sign for goods received
Despatch documentation is not sequentially pre-numbered
Sales may be made to customers who cannot pay
Invoices may not be raised for all goods desptached
Customers may not pay promptly
Customers are not required to evidence receipt of goods
Sales may be made to customers who cannot pay
Invoices may not be raised for all goods despatched
Customers may not pay promptly
Which two of the following are objectives of the sales ordering part of the sales system?
Sales are only made to credit worthy customers
Goods are correctly invoiced
Cut-off is correct
Orders can be fulfilled
1. Orders are placed by telephone. On receipt of a call, following credit checks and checks of the inventory level, the order is immediately entered onto the system.
2. The order generates a despatch record which is sent to the warehouse, and an invoice which is sent to accounts receivable. Goods in inventory are despatched immediately and the despatch record is amended manually for unavailable goods.
3. A copy of any despatch records with incomplete orders is placed in an 'unfulfilled orders' file. This file is reviewed daily and the order filled as soon as inventory is available.
Strength - Deficiency - Strength
Deficiency- Strength - Deficiency
Deficiency - Strength - Deficiency
Strength - Strength - Strength
Which one of the following is a control objective relating to the sales system?
Credit notes are only issued for valid reasons
Sales invoices are checked to goods despatched records by accounts staff
Customer accounts are scrutinised to see if credit limits have been obverved.
Orders are made only to authorised suppliers
Which one of the following controls would provide the most positive assurance regarding the completeness of the sales figure recorded in the financial statements of a manufacturing company?
Segregation of duties between the preparation of goods despatched records and the preparation of the sales invoices
The issue of pre-numbered sales invoices for every sales transaction and internal checking for completion of processing
The use of a pre-numbered goods despatched record for every sales transaction and internal checking for completeness of processing
Authorisation of all sales invoices by the sales manager before processing
Which one of the following populations should the auditor start from when testing for the completeness of reported sales of a manufacturing company?
Sales receipts
Sales invoices
Goods despatch records
Receipts from customers
Which two of the following are risks directly associated with recording in the revenue system?
Sales are included in the wrong customer accounts
Goods are recorded incorrectly
Goods may be despatched but not invoiced for
Credit notes might not be properly recorded
Monthly management accounts are compared to budget and differences investigated
Authorisation
Performance review
Information processing
Numerical sequence checks are undertaken on goods received records
Authorisation
Performance review
Information processing
The most likely consequence
Goods inwards are not checked
Accepting inferior quality goods
False invoices could be paid
Services received are not accurately recorded
The most likely consequence
Invoices are not checked to original orders
Accepting inferior quality goods
False invoices could be paid
Services received are not accurately recorded
Orders are placed by department heads, usually by telephone, when they determine a service is required.
Strength
Deficiency
Invoices for services are checked against the service provider's proof of delivery of service, which is requested from every service provider
Strength
Deficiency
Payments are made by direct transfer. The direct transfer list is authorised by the financial controller, who checks the payments to supporting documents, such as the invoice or service agreement.
Strength
Deficiency
Redesign Ltd is a large property management company which makes use of the services of many different contractors for building, design and decorating services.
Which two of the following internal controls are most likely to prevent services being used for the private purposes of employees?
Purchase orders are processed by the buying department following authorisation by the production director
Purchase requisitions must be signed by two team members for any given project
Purchase orders should only be placed with authorised contractors
Purchase invoices are matched to authorised purchase orders
The production department is headed by Jack Frost, whose deputy is Tiny Tim. Jack Frost reports to the managing director, Nicholas Clause. There are several other departments (sales and marketing, accounting, purchasing, human resources and internal audit).
Which one of the following statements reflects the ideal situation with regard to purchase ordering?
Jack Frost and Tiny Tim should make purchase orders as production needs dictate
Jack Frost should make purchase orders, although Tiny Tim could make requisitions as production needs dictate.
Jack Frost and Tiny Tim should requisition materials as production needs dictate, but orders should be placed by the purchasing department, having been authorised by the purchasing director.
Jack Frost and Tiny Tim should requisition materials as production needs dictate but orders should be placed by the purchasing department, having been authorised by Nicholas Clause.
Grey Ltd has recently discovered that it has been paying invoices in respect of goods which had been returned as faulty before acceptance. It is company policy to record goods only if they have been accepted.
Which one of the following controls would have prevented this from occurring?
Matching of purchase invoices with goods received records
Matching of purchase invoices with orders
Comparison of supplier statements with payables ledger accounts
Date stamping purchase invoices on receipt
Errors have been made in the calculation of discounts receivable.
Authorisation
Physical controls
Information processing
There has been increasing levels of theft from the main distribution centre.
Authorisation
Physical control
Information processing
The most likely consequence
Purchase of goods from unauthorised suppliers
Payment to fictitious suppliers
Purchase of inferior goods
Prompt payment discounts not obtained
The most likely consequence
Purchase ledger clerks permmited to amend standing data on the payables master file
Payment to fictitious supplier
Purchase of inferior goods
Prompt payment discounts not obtained
Which three of the following are control activities relating to the purchases system?
All orders are authorised by a senior staff member
Blank order forms are kept in a secure location with restricted access
All goods and services received are accurately recorded
Order forms are sequentially pre-numbered
New inventory is ordered over the telephone by the company buyer, who initiates orders herself and maintains a record of telephone orders
Strength
Deficiency
When goods are subsequently received, the buyer has sole responsibility for checking the quantity of goods received to the record of telephone orders.
Strength
Deficiency
Invoices from suppliers are sent to the buyer for authorisation, before being forwarded to the Accounts Department for entry into the accounting records and subsequent payment.
Strength
Deficiency
The most likely risks
A lack of segregation of duties in relation to the ordering process
Unauthorised purchases may be made for personal use
The company may not take advantage of the full period of the credit extended
The most likely risks
Records of goods received are not kept
Goods may be misappropriated for private use
Goods and services might not be obtained on the most advantageous terms
The most likely risks
The payment listing produced by the accounting system is only read by the payments clerk
Invoices may not be recorded resulting in non-payment
Invoices are paid at the wrong time
The risk which arises most immediately.
Comparisons are not made of goods received notes with purchase orders
Unauthorised purchases may be made for personal use
Entries to the payables ledger are not made to the correct accounts
The risk arises most immediately
Supplier terms are not regularly monitored
Goods and services may be obtained from unauthorised suppliers
Goods and services may not be obtained on the most advantadeous terms
The risk which arises most immediately
Pre-numbered goods received notes are not used to record the arrival and acceptance of goods
Goods and services received may not be accurately record
Goods and services received may not result in liabilities being recorded correctly
Blank order forms are readily available from a tray in the finance department
Strenght
Deficiency
Buyers have a free choice of suppliers, in order to obtain the best terms
Strength
Deficiency
Order forms are prepared only when a pre-numbered purchase requisition has been received
Strength
Deficiency
Which two of the following describe control activities in the purchases system of Wottinger Ltd?
A purchase ledger clerk checks all supplier invoices against the order and the goods received record
All orders for goods and services are properly authorised and duly processed
All goods and services received are accurately recorded
All purchase order forms are sequentially pre-numbered
Hire Company Ltd uses a lot of temporary employees.
Which one of the following controls would best ensure that employees are only paid for work they have performed?
Temporary staff records should be maintained for each member of temporary staff.
Temporary staff should complete work schedules, authorised by their supervisor.
Temporary staff pay should be authorised by the human resources manager.
Temporary staff should be paid by direct transfers to their bank accounts.
Tulips Ltd has a number of staff on maternity leave claiming statutory maternity pay.
Which three of the following controls would best ensure that the correct payments are made to employees?
The payroll should be checked back to individual employee personnel records
Payroll totals should be compared to adjusted budgets on a monthly basis
Total tax deductions should be reconciled with tax returns
BACS transfer lists should be authorised by the head of personnel
- Requiring employees to clock in and out of work helps to ensure that they are paid at the correct rate.
- Reviewing wages paid against wages budgeted helps to ensure that employees are being paid the correct amounts.
- Changes in pay rates should be authorised by senior management.
(a)
- Employees are not given a personnel file until they have completed their six month probationary period.
- Many employees work overtime but there is no system for authorising the levels of overtime claimed.
A Employees may be paid the wrong amounts
B The computerised payroll may contain miscalculations
AA
AB
BA
BB
- Employees are given individual security codes to punch into the main door key pad. This key pad also monitors the hours worked by employees, a sample of which are checked against data from headcounts during the day.
- The payroll is prepared by a payroll clerk from hours worked information on a standard payroll IT package. The payroll is checked to individual records automatically by the system. The payroll is approved by the financial controller.
- Wages are paid by bank transfer, which is authorised by the financial controller.
(a)
Workworld Ltd has a computerised payroll system. All employees are paid by BACS directly into their bank account.
Which two of the following controls will be most effective at ensuring that payment is made to the correct employee?
Authorisation of overtime worked
A sample of calculations performed by the payroll package are manually reperformed each month
The BACS list is reviewed by the chief accountant together with supporting payroll documentation
The print out from the bank is agreed to the BACS list and any discrepancies investigated
Whichtwo of the following features in the payroll system of Tyne plc could result in the employee costs figure in the financial statements being misstated?
Rates of pay are negotiated at a local level, there is no central control
The payroll clerk can amend standing data on the payroll system without authorisation of a senior member of staff
Personnel records are not kept up to date
The payroll department receives confirmation of new employees in writing
- The payroll should be checked back to individual employee personnel records on a regular basis.
- Leavers and joiners should be authorised by a senior member of staff.
- Reperformance of calculations is unnecessary where the payroll system is computerised.
(a)
Spoon Ltd is a company that is expanding rapidly and is regularly taking on new employees. The payroll is processed in-house in the accounts department using a PC. The financial controller is worried that fictitious employees could be included on the payroll by a dishonest employee from the accounts department.
Which one of the following internal controls is most likely to prevent fictitious employees from being added to the payroll?
Payroll standing data periodically printed out and checked on a line-by-line basis to independently held employee details
Use of hierarchical passwords over standing data files
Pre-authorisation of all amendments to payroll standing data by an independent official
Supervision of the wages payout by an independent official
Whichtwo of the following control procedures will reduce the risk of unauthorised disclosure of payroll data?
Exception reporting of high amounts of net pay
Back-up procedures
Encryption of data
Independent review of payroll
Access controls
For each deficiency, select the risk which is most likely to arise.
- Details of wages are not regularly checked to the personnel file.
- Regular reconciliations of the payroll to timesheets are not performed.
- Regular reconciliations of the wages and salaries control account are not performed.
A Payments might be made incorrectly
B The various elements of pay might not be calculated correctly
(a)
- The payroll master file should contain details of the employee's cumulative statutory deductions to date.
- Reviewing changes to statutory deductions helps to ensure that changes to the calculation of gross pay are processed correctly.
- Reviewing wages paid against budgets and timesheets helps to ensure that employees are only paid for the work that they have done.
True/False
(a)
Whichtwo of the following control activities will reduce the risk that the different elements of pay might not be recorded correctly in the payroll?
One for one checking of payroll details back to independently maintained personnel records
Segregation of duties throughout the payroll department
Reconciliation of total pay and deductions between one pay day and the next
Encryption of data
For each deficiency, select the risk which is most likely to arise.
- No central records are kept of changes in personnel and pay rates.
- There are no procedures for dealing with non-routine matters.
- There is no segregation of duties between the preparation and the authorisation of the payroll.
A Pay might not be recorded correctly in the general ledger
B The company may pay employees who have left
(a)
