Internal Controls
True or False: In a well designed internal control, employees in the same department would approve purchase orders and also negotiate terms with vendors
True
This component receives a requisition from the purchasing department
Receiving dept.
This duty is responsible for creating and maintaining accounting records, enters JEs
Record Keeping
True or False: In testing controls over cash disbursements, an auditor would want to determine that the person responsible for signing the check also mails the check
True
True or False: The accounting department is responsible for controlling the mailing of the check and remittance advice
False
This component has a need and sends a purchasing requisition to the receiving department
Purchasing
This duty has control/access to the assets related to the transaction
Custody
Tests designed to detect purchases made before year end that have been recorded in the subsequent year provides assurance about which assertion?
Cutoff
Which of the following describes a weakness in A/P procedures?
A. A/P clerk manually verifies arithmetic on vendor invoice
B. A/P clerk files invoices and supporting documentation after payment
C. The A/P manager issues purchase orders
D. A/P system compares the receiving report to the vendor invoice
B. Purchase orders should be issued by the purchasing department, not accounts payable department
This component receives a copy of the receiving report, the purchase order, and the invoice from the vendor to perform 3-way match
Accounts Payable (accounting)
This function oversees the transaction, reviews and approves
Authorization
In auditing accounts payable, an auditor's procedures most likely would focus primarily on which assertion?
Completeness
For effective internal control, the accounts payable department should match/agree which three documents? (3-way match)
1. Vendor's invoice (what we are billed for)
2. Receiving report (what we got)
3. Purchase order (what we ordered)
This component (sometimes individual) receives a voucher package containing all relevant documents from the transactions, signs the check and cancels the completed voucher package
Treasurer
What is the primary purpose of having properly functioning segregation of duties?
Serves as a critical internal control function, prevents fraud/deters collusion
To gain assurance that each voucher is submitted and paid only once an auditor would examine a sample of paid vouchers and determine whether each voucher is:
A. Supported by a vendor invoice
B. Prenumbered and accounted for
C. Approved for authorized purchases
D. Stamped "paid" by the check signer
D. Stamped "paid" by the check signer