Corporate Governance QUIZ PDF

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CORPORATE GOVERNANCE 1. Which of the following business function is associated with the revenue/receipt cycle? a. Resources are held, used or transformed. b. Obligations are paid to vendors and employees c. Capital funds are received from investors and creditors d. Resources are distributed to outsiders in exchange for promises of future payments 2. The internal controls surrounding the revenue cycle provide the organization with several assurances that include all of the following except the a. Approval of all credit sales transactions after they are processed b. Accurate recording, shipping, and billing of all valid sales transactions. c. Proper authorization of all sales and sales return and allowances transactions d. Proper safeguarding of finished goods inventories while in stock and during the shipment process. 3. The internal control objectives of the revenue cycle include all of the following except a. Revenue cycle transactions are properly executed b. Transactions relating to revenue are properly recorded c. Appropriate goods are ordered so that sales can be made d. Custody over assets resulting from the revenue cycle is properly maintained. 4. Which of the following is not typically included in the sales and collection cycle? a. Bad debt expense b. Sales return and allowances c. Allowance for uncollectible accounts d. Cash credits from the cash disbursement journal 5. Which of the following is not normally considered a step in the credit sales function? a. Approving credit c. Accepting customer orders b. Shipping the sales order d. Acquiring goods to fill the order. 6. Before goods are shipped on account, a properly authorized person must a. Approve credit b. Prepare the sales invoice c. Approve the journal entry d. Verify that the unit price is accurate. 7. To achieve good internal control, which department should perform the activities of matching shipping documents with sales orders and prepares daily summaries? a. Billing department c. Shipping document b. Credit department d. Sales order department 8. Which of the following control procedures may prevent the failure to bill customers for some shipments? a. Each shipment should be supported by a pre-numbered sales invoice that is accounted for b. Each sales order should be approved by authorized personnel c. Sales journal entries should be reconciled to daily summaries d. Each sales invoice should be supported by a shipping document. 9. Which of the following controls most likely would be effective in offsetting the tendency of sales personnel to maximize sales volume at the expense of high bad debts write-offs? a. Employees responsible for authorizing bad debt write- offs are denied access to cash b. Employees involved in the credit granting are separated from sales function.

c. Shipping documents and sales invoices are matched by an employee who does not have authority to write-off bad debts. d. Subsidiary accounts receivable records are reconciled to the control account by an employee independent of the authorization of credit. 10. Which of the following control procedures could prevent or detect errors or frauds arising from shipments made to unauthorized parties? a. Document policies and procedures for scheduling shipments b. Establish procedures for reviewing and approving prices and sales terms before sale. c. Prenumber bills of lading and assure that related billings are made on a periodic basis. d. Prepare and periodically update lists of authorized customers. 11. Which of the following controls most likely would assure that all billed sales are correctly posted to the accounts receivable ledger? a. Each shipment on credit is supported a prenumbered sales invoice b. Each sales invoice is supported by a prenumbered shipping document c. Daily summaries are compared to daily postings to the accounts receivable ledger d. The accounts receivable ledger is reconciled daily to the control account in the general ledger 12. Defective merchandise returned by customers should be presented to a. Inventory control personnel c. Receiving personnel b. Purchasing personnel d. Sales personnel 13. To achieve control when there is no billing department, the billing function should be performed by the. a. Accounting department c. Shipping department b. Sales department d. Accounts receivable clerk 14. The person who opens the mail commonly prepares a remittance advice when a customer fails to return one with a payment. Consequently, mail should be opened by the a. Credit manager c. Sales manager b. Receptionist d. Accounts receivable clerk 15. Which of the following is an effective internal control over accounts receivable? a. Balances in the subsidiary accounts receivable ledger should be reconciled to the general ledger control account once a year, preferably at year-end b. Responsibility for approval of the write-off of uncollectible accounts receivable should be assigned to the cashier c. The billing function should be assigned to persons other than those responsible for maintaining accounts receivable subsidiary records. d. Only persons who handle cash receipts should be responsible for the preparation of documents that reduce accounts receivable balances. 16. Which of the following fraudulent activities most likely could perpetrated due to lack effective control in the revenue cycle? a. The failure to prepare shipping documents may cause an overstatement of inventory balances. b. Authorization of credit memos by personnel who receives cash may permit the misappropriation of cash c. Fictitious transactions may be recorded that may cause an understatement of revenues of overstatement of receivables. d. Claims received from customers for goods returned may be intentionally recorded in other customer’s accounts

17. Assuming cash receipts from credit sales have been misappropriated, which of the following is likely to conceal the misappropriation and unlikely to be detected? a. Understating the sales journal c. Overstating the accounts receivable subsidiary ledger b. Overstating the accounts receivable control account d. Overstating the cash receipts journal 18. Which of the following control procedures will likely prevent the concealment of a cash shortage that was perpetrated by improperly writing off a trade accounts receivable? a. Write-offs must be approved by the cashier b. Write-offs must be authorized by the field sales representative c. Write-offs must be supported by an aging schedule showing that only receivables months overdue have been written off. d. Write-offs must be approved by a responsible officer after reviewing credit department recommendations and supporting evidence 19. The purpose of tests of controls over shipping is to determine whether a. Shipments are billed c. Credit is approved before goods are shipped b. Billed goods have been shipped d. Shipping department personnel are competent. 20. The purpose of test of controls over billing is to determine whether a. Shipments are billed c. Credit approved before goods are billed. b. Billed goods have been shipped d. Billing department personnel are competent 21. Which of the following functions is not common to the expenditure/disbursement cycle? a. Obligations to vendors are paid c. Resources are acquired from vendors in exchange for obligations to pay b. Resources are held, used or transformed d. Resources are acquired from employees in exchange for obligations to pay 22. The primary audit regarding the purchasing of materials by the client is to a. Observe the annual physical count b. Ascertain that materials paid for are on hand c. Investigate the recording of unusual transactions regarding materials d. Determine the reliability of financial reporting by the purchasing function. 23. A request by an authorized employee for goods or services is made on the a. Debit memo c. Purchase requisition b. Purchase order d. Acquisition transaction file 24. Which of the following is a primary function of the purchasing department? a. Authorizing the acquisition of goods b. Reducing the expenditures for goods acquired c. Verifying the propriety of goods of a specified quality d. Ensuring the acquisition of goods of a specified quality 25. If internal control is well-designed, employees in the same department most likely would approve purchase orders and also a. Inspect goods upon receipt c. Negotiate terms with vendors b. Authorize requisition of goods d. Reconcile the open invoice file 26. The authority to accept incoming goods in receiving should be based on a(n) a. Bill of lading c. Materials requisitions

b. Vendor’s invoice

d. Approved purchase order

27. Internal control is improved when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the a. Department that initiated the requisition c. Receiving department b. Accounts payable department d. Purchasing agent 28. When goods are received, the receiving clerk should match the goods with the a. Purchase order and requisition c. Vendor’s shipping document and the purchase order b. Vendor’s invoice and the receiving report d. Receiving report and the vendor’s shipping documents 29. The accounts payable department receives a purchase order form to accomplish all of the following, except a. Comparing invoice price to purchase order price b. Comparing quantity ordered to quantity purchased. c. Ensuring that the purchase had been properly authorized. d. Ensuring that the goods had been received by the party requesting the goods. 30. Matching the supplier’s invoice, the purchase order, and the receiving report normally should be the responsibility of the a. Treasury function c. Receiving department b. Accounting function d. Purchasing department 31. Accounts payable department usually has the responsibility for verifying the propriety of acquisitions by comparing the details on the a. Vendor’s invoice and receiving report b. Vendor’s invoice the purchase requisition c. Purchase order, receiving report, and vendor’s invoice d. Purchase requisition, purchase order, and receiving report 32. What is the reason for ensuring that every copy of a vendor’s invoice has a receiving report? a. To ascertain that merchandise billed by the vendor was received by the company b. To ascertain that merchandise received by the company was billed by the vendor c. To ascertain that a check was prepared for every invoice d. To ascertain that he invoice was correctly prepared. 33. Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of goods that were not received? a. Match the purchase order, receiving report and vendor’s invoice for each voucher in accounts payable department b. Compare goods received with goods requisitioned in receiving department c. Verify vouchers for accuracy and approval in internal audit department d. Count goods upon receipt in the storeroom. 34. Which of the following controls is not usually performed in the voucher payable department? a. Approving vouchers payment by having an authorized employee sign the vouchers b. Accounting for unused prenumbered purchase orders and receiving reports c. Matching the vendor’s invoice with the related receiving report d. Indicating the asset and expense accounts to be debited. 35. For good internal control, the person who should sign check is the a. Person preparing the checks c. purchasing agent

b. Accounts payable clerk

d. Treasurer

36. The procedure that would discourage the resubmission of vendor invoices after they have been paid is a. A requirement for double endorsement of checks b. The cancellation of vouchers by accounting personnel c. The cancellation of vouchers by treasurer personnel d. The mailing of payments directly to payees by accounting personnel 37. The receipt of goods and services in the normal course of business represents the date clients normally recognize a. Liability c. Warranty b. Income d. Expenses I.

Identification – write the correct answer on the space provided.

1. This is a document that describes the goods to be shipped and serves as a contract between the entity and carrier Shipping Document 2. This document describes the good sold, amount due and the terms of payment Vendors invoice 3. This department grant sales returns and allowances and prepares credit memo which is forwarded to customer, accounts receivable and inventory control Sales Department 4. This department approves remittance advice that is intended to facilitate the accounting for cash collection Billing Department 5. This document describes the goods sold, amount due and the terms of payment Vendors invoice 6. This department is responsible for locating and encouraging buyers and negotiates terms with buyers Sales Department 7. This department prepares the requisition slip to be forwarded to purchasing and accounts payable departments User Department 8. This department monitors the availability of goods ordered and authorizes the issuance of goods to the shipping department Inventory Control Department...