AIS Exam 3 Study Guide Content (Ch 14, 15, 18) Okstate

ch14 -1. The credit approval process involves which of the following?

a. Establishing a credit limit

b. Investigating the credit history of the customer

c. Verifying the customer order does not exceed an authorized limit

d. All of the above.

d. All of the above.

ch14 -2. The billing cycle includes the following:

a. invoicing.

b. shipping.

c. updating accounts receivable.

d. Making bank deposits.

e. Answers a and c.

e. Answers a and c.

ch14 -3. The open invoice method involves which of the following activities?

a. customers pay from a balance on a monthly statement.

b. remittances are applied against a total account balance.

c. customers pay specific invoices.

d. None of the above.

c. customers pay specific invoices.

ch14 -4. A credit memo

a. is issued by the customer.

b. is issued by the cashier.

c. is issued by the credit manager.

d. increases accounts receivable.

c. is issued by the credit manager.

ch14 -5. An electronic lockbox has which of the following functions?

a. Safeguards cash

b. Improves cash management

c. Minimizes the time customer checks are in the mail

d. All of the above.

d. All of the above.

ch14 -6. Which of the following provide useful information for evaluating current credit policies and for deciding whether to increase the credit limit for specific customers?

a. Cash budget

b. Profitability analysis reports

c. Sales analysis reports

d. Accounts receivable aging schedule e. None of the above.

d. Accounts receivable aging schedule

ch14 -7. Which of the following is a threat to the Sales Order Entry activity of the Revenue Cycle?

a. Uncollectible accounts.

b. Failure to bill.

c. Billing errors.

d. Theft of inventory.

a. Uncollectible accounts.

ch14 -8. Which of the following is NOT a control for mitigating the risk of posting errors in accounts receivable?

a. Data entry controls.

b. Set proper credit limits.

c. Reconciliation of batch totals.

d. Mailing monthly statements to customers.

b. Set proper credit limits.

ch14 -9. If the information is inaccurate or incomplete on a sales order

a. inefficiencies are created in the processing of the sales order.

b. negatively affect customer perceptions.

c. Both answers 1 and 2 are correct.

d. None of the above is correct

c. Both answers 1 and 2 are correct.

ch14 -10. Which of the following is NOT a threat associated with billing and accounts receivable?

a. Failure to bill customers

b. An error in billing

c. Posting errors in updating accounts receivable

d. Theft of cash

d. Theft of cash

ch14 -11. Steps to reduce the risk of inventory theft include:

a. inventory is kept in a secure location, with limited physical access.

b. all inventory transfers within the company are documented.

c. inventory is released only upon approved sales orders.

d. All of the above.

d. All of the above.

ch14 -12. The control known as closed loop verification is associated with:

a. accuracy of updating customer accounts.

b. preventing the theft of cash.

c. encryption controls.

d. separation of billing and shipping functions.

a. accuracy of updating customer accounts.

ch14 -13. Billing errors include pricing mistakes and sending the wrong merchandise to the customer.

a. True

b. False

b. False

ch14 -14. A back order is created when inventory doesn't exist to fill a customer order.

a. True

b. False

a. True

ch14 -15. A sales order triggers the shipping process.

a. True

b. False

a. True

ch14 -16. A bill of lading is a legal contract between the customer and the vendor or seller.

a. True

b. False

b. False

ch14 -17. A credit memo is generated by the receiving department after a customer has returned merchandise.

a. True

b. False

b. False

ch15 -1. The threat of inaccurate inventory records can be mitigated by which of the following controls?

a. Bar coding or RFID tags

b. Review of purchase orders

c. Verification of invoice accuracy

d. Supplier audits

e. None of the above.

a. Bar coding or RFID tags

ch15 -2. Ordering unnecessary items can result from:

a. Competitive bidding.

b. Inaccurate perpetual inventory records.

c. Require receiving employees to sign the receiving report.

d. None of the above.

b. Inaccurate perpetual inventory records.

ch15 -3. What is a method that companies use to minimize the risk of inferior quality products?

a. Tracking and monitoring product quality by supplier.

b. Using encryption techniques

c. Providing adequate storage

d. All of the above.

a. Tracking and monitoring product quality by supplier.

ch15 -4. The practice of allowing kickbacks:

a. improves the position of the company.

b. results in higher quality purchases.

c. impairs the objectivity of the purchaser.

d. provides quantity discounts.

c. impairs the objectivity of the purchaser.

ch15 -5. What is the most effective technique used to minimize the risk of an inaccurate inventory counts?

a. Quick visual comparison of amounts received and those indicated on the packing slip

b. Using the Economic Order Quantity model

c. The use of a bar-coding or radio frequency identification tag (RFID) system

d. The use of just-in-time (JIT) accounting systems.

c. The use of a bar-coding or radio frequency identification tag (RFID) system

ch15 -6. An effective method of reducing the risk of theft is

a. an annual inventory count.

b. proper segregation of duties.

c. requiring the employee who maintains custody of inventory to also record inventory transactions.

d. All of the above.

e. None of the above.

b. proper segregation of duties.

ch15 -7. What control procedures reduce the risk of paying the same invoice twice?

a. Invoices are approved for payment only when accompanied by a complete voucher packet.

b. Only the original invoice copy should be paid.

c. Paid invoices should be marked "paid".

d. Payment should never be made on an invoice copy.

e. All of the above.

e. All of the above.

ch15 -8. Which inventory system attempts to minimize inventory costs by only purchasing goods required for actual sales orders?

a. Material requirements planning (MRP) b. Economic order quantity (EOQ)

c. Just-in-time (JIT)

d. Reorder point

c. Just-in-time (JIT)

ch15 -9. What are the typical expenditure cycle functions?

a. Verify the accuracy of vendor invoices b. Select the appropriate vendors from whom to order

c. Decide if appropriate discounts have been taken

d. Monitor cash flow needed to pay obligations

e. All of the above.

e. All of the above.

ch15 -10. What is one unusual feature of an imprest petty cash fund?

a. The threat of misappropriation of assets.

b. The lack of segregation of duties involved in administering the account.

c. It has an audit trail.

d. The account is reviewed periodically by internal auditors.

b. The lack of segregation of duties involved in administering the account.

ch15 -11. The risk of receiving unordered goods is prevented most effectively by

a. surprise audits.

b. recalculation of invoice prices.

c. instruct the receiving department to accept deliveries only those goods where there is an approved copy of the purchase order.

d. All of the above.

c. instruct the receiving department to accept deliveries only those goods where there is an approved copy of the purchase order.

ch15 -12. The objective of approving and paying vendor invoices is to ensure:

a. company pays only for goods and service ordered.

b. company pays only for goods and service received.

c. company pays only for goods and service ordered and received.

d. None of the above.

c. company pays only for goods and service ordered and received.

ch15 -13. The primary objective of the expenditure cycle is to minimize the total cost of acquiring inventories and supplies.

a. True

b. False

a. True

ch15 -14. A key decision with respect to the expenditure cycle does not include the optimal level of inventory.

a. True

b. False

b. False

ch15 -15. Material requirements planning (MRP) relies on sales forecasts to schedule inventory purchases.

a. True

b. False

a. True

ch15 -16. Obsolescence is a disadvantage associated with JIT inventory systems.

a. True

b. False

b. False

ch15 -17. Kickbacks are a threat associated with the ordering of goods.

a. True

b. False

a. True

ch18 -1. Adjusting entries include each of the following:

a. accruals.

b. deferrals.

c. estimates.

d. revaluations.

e. All of the above.

e. All of the above.

ch18 -2. Which of the following controls best addresses the threat of inaccurate adjusting entries?

a. Spreadsheet error protection controls

b. Audit trail creation and review

c. Processing integrity controls.

d. All of above.

d. All of above.

ch18 -3. The problem(s) with static budgets include the following:

a. they establish one set of budgetary figures, regardless of the actual output level.

b. they may not be perceived as fair or accurate by production managers.

c. They are not compatible with a balanced scorecard.

d. Both answers a and b.

d. Both answers a and b.

ch18 -4. An eXtensible Business Reporting Language (XBRL) document that contains "tagged data" delivered to users is called a(n)

a. data document.

b. tagged document.

c. balance scorecard.

d. instance document.

d. instance document.

ch18 -5. Which of the following techniques assist with meeting general ledger control objectives?

a. Using pre-numbered journal entries

b. The use of validity checks

c. Restricting access to general ledger programs

d. All of the above.

e. None of the above.

d. All of the above.

ch18 -6. The threat of loss or alteration of financial data can be minimized by:

a. encryption.

b. access controls.

c. Audit trail creation and review

d. Answer a and Answer b

d. Answer a and Answer b

ch18 -7. Processing controls include:

a. validity checks.

b. field checks.

c. closed loop verification.

d. run-to-run totals.

e. All of the above.

e. All of the above.

ch18 -8. The balanced scorecard

a. focuses on activities which most directly impact customer perceptions.

b. focuses on activities which compose the accounting cycle.

c. focuses on activities which form the basis of adjusting entries.

d. focuses on activities which form manager satisfaction.

e. None of the above.

a. focuses on activities which most directly impact customer perceptions.

ch18 -9. A journal voucher file contains which of the following data items?

a. account number.

b. source reference code.

c. amount debited or credited.

d. All of the above.

d. All of the above.

ch18 -10. Which of the following does NOT make bar graphs easier to read?

a. Utilizing titles that summarize the basic message

b. Utilizing 3-D bars

c. Utilizing 2-D bars

d. Using differing shades of gray or colors to represent different variables

b. Utilizing 3-D bars

ch18 -11. Which element of the balanced scorecard would be represented by the return on equity?

a. Financial

b. Internal operations

c. Innovation and learning

d. Customer perspectives of the organization

e. Not represented in the balanced scorecard

a. Financial

ch18 -12. Which of following is NOT a basic attribute used to define an element in an XBRL document?

a. data type.

b. period type.

c. voucher type.

d. balance type.

c. voucher type.

ch18 -13. Accruals reflect events that have occurred but no cash has been received or disbursed.

a. True

b. False

a. True

ch18 -14. A trial balance is where journal entries are posted.

a. True

b. False

b. False

ch18 -15. Flexible budgets do not take into consideration unforeseen changes in the operating environment.

a. True

b. False

b. False

ch18 -16. An audit trail tracks a transaction from the source document through the general ledger.

a. True

b. False

a. True

ch18 -17. One threat of EXtensible Business Reporting Language (XBRL) enabled financial statements for IFRS is that the statements may not accurately reflect the results of operations.

a. True

b. False

a. True