Chapter 4

1. Which document is not prepared by the sales department?

a. Packing slip b. Shipping notice c. Bill of lading d. Stock release

2. Which document triggers the update o f the inventory subsidiary ledger?

a. Bill of lading b. Stock release c. Sales order d. Shipping notice

3. Which function should not be performed by the billing department?

a. Record the sales in the sales journal.
b. Send the ledger copy of the sales order to accounts receivable.
c. Send the stock release document and the shipping notice to the billing department as a proof of
shipment.
d. Send the stock release document to inventory control.

4. When will a credit check approval most likely require specific authorization by the credit department?
a. When verifying that the current transaction does not exceed the customer’s credit limit
b. When verifying that the current transaction is with a valid customer
c. When a valid customer places a materially a large order
d. When a valid customer returns goods

5. Which type of control is considered to be a mitigating control?

a. Segregation of duties c. supervision
b. Access control d. accounting records

6. Which of the following is not an independent verification control?

a. The shipping department verifies that the goods sent from the warehouse are correct in type and
quantity.
b. General ledger clerks reconcile journal vouchers that were independently prepared in various
departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice with the sales invoice to ensure that
customers are billed for only the quantities shipped.

7. Which of the following poses the biggest threat with respect to potential losses?
a. The petty cash custodian has the ability to steal petty cash. Documentation for all disbursements
from the fund must be submitted with the request for replenishment of the fund.
b. An inventory control clerk at a manufacturing plant has the ability to steal one completed television
set from inventory a year. The theft probably will never be detected.
c. An accounts receivable clerk, who approves sales returns and allowances, receives customer
remittances and deposits them in the bank. Limited supervision is maintained over the employee.
d. A clerk in the invoice processing department fails to match a vendor’s invoice with its related
receiving report. Clerks are not singed unless all appropriate documents are attached to a voucher.
e. An accounting clerk has the ability to record unauthorized journal entries. All journal entries are
reviewed by an accounting department supervisor each month.

8. In a well-designed internal control structure in which the cashier receives remittances from the mail
room, the cashier should not
a. endorse the checks
b. prepare the bank deposit slip
c. deposit remittances daily at a local bank
d. prepare a list of mail receipts
e. post the receipts to the accounts receivable subsidiary ledger

9. Which of the following situations represents an internal control weakness in accounts receivable?
a. Internal auditors confirm customer accounts periodically
b. Delinquent accounts are reviewed only by the sales manager
c. The cashier is denied access to customers’ records and monthly statements
d. Customers’ statements are mailed monthly by the accounts receivable department
e. Customers’ subsidiary records are maintained by someone who has no access to cash
10. What makes a revenue cycle complex?
a. processes sales in double transactions c. processes goods or services for cash
b. processes sales on credit d. processes sales by automation

11. There are two phases of revenue transaction, one of which is the physical phase. It involves
a. receipt of cash from the buyer
b. transfer of assets or services from the buyer
c. transfer of assets or services from the seller
d. receipt of cash from the seller

12. Another phase of revenue transaction is the financial phase, which involves
a. transfer of assets or services from the buyer
b. receipt of cash by the seller
c. receipt of cash by the buyer
d. transfer of assets or services from the seller
13. When does the sales process begin in the sales department?
a. receipt of the purchase order c. receipt of the customer’s order
b. receipt of the sales order d. receipt of the transaction authorization

14. What marks the completion of the economic event and the point at which the customer should be billed?
a. releasing of goods from the warehouse c. sending the sales invoice to the customer
b. shipment of goods d. receipt of goods by the customer

15. A document that establishes the legal ownership and responsibility for assets in transit.
a. Picket ticket b. Packing slip c. Bill of lading d. sales invoice

16. It promotes inaccuracies in record keeping and inefficiencies in operations in the billing department.
a. incorrect goods being shipped c. billing before shipment occurs
b. delay in the shipment d. billing after shipment

17. What causes confusion with customers and requires additional work to make adjustments to the
accounting records?
a. billing after shipment c. billing of goods not shipped
b. billing before shipment d. delayed shipment of goods

18. There are reasons why there are sales returns. From the following, which one is NOT a reason?
a. late shipment of goods c. product was damaged in shipment
b. wrong shipment of goods d. erroneous billing

19.There are two documents being received by the mail room from the customer. One of which is the check
and the other is
a. remittance list b. remittance advice c. transmittal slip d. voucher slip

20. In the Accounts Receivable Department, this document is used for posting to the customer’s account in
the AR subsidiary ledger and then filed to provide an audit trail.
a. cash prelist b. remittance advice c. transmittal slip d. voucher slip

21. The cashier in the Cash Receipts Department verifies the accuracy and completeness of the check
against the
a. voucher slip b. prelist c. remittance advice d. transmittal slip

22. Transaction authorization is one of the revenue cycle controls. Its objective is to ensure that only valid
transaction is processed. Credit department is the point of authorization and their principal concern is the
a. proper application of the firm’s credit policies c. trustworthiness of the customer
b. materiality of the transaction d. relationship with the customer

23. Another revenue cycle control is the segregation of duties. Under this control activity, there are three
rules used as guide for systems designer. Which of the following is NOT a rule?
a. The organization should be structured so that the perpetration of a fraud requires collusion between
two or more individuals.
 b. The organization should be structured so that the perpetration of a fraud requires collision between
two or more individuals.
c. Transaction authorization should be separate from transaction processing.
d. Asset custody should be separate from the task of asset record keeping.

24. In Accounting records, another revenue cycle control, there are control techniques that contribute to
audit trail. Which of the following is NOT a control technique?
a. special journals b. files c. source documents d. subsidiary ledgers

25. The revenue cycle employs several files, temporary and permanent, that contribute to audit trail. From
the following, which one is NOT a typical example of revenue cycle file?
a. closed sales order file
b. credit memo file
c. shipping report file
d. sales history file

26. The physical assets of the revenue cycle are

a. inventories and cash c. accounts receivables and inventories
b. accounts receivables and cash d. accounts receivables and merchandise

27. Automation simply

a. emulates the traditional manual process it replaces
b. replaces traditional procedures by new procedures
c. replaces manual procedures
d. improves saves costs and manual intervention

28. Reengineering involves

a. the use of technology to improve manual operations by eliminating manual intervention
b. radically thinking the business process and the flow of work
c. emulating the traditional manual process it replaces
d. none of the above

29. In automating sales order processing with the use of batch technology, there are computer processing
phases. Which of the following is NOT a processing phase?
a. update procedure b. keystroke c. edit run d. daily procedure

30. The objective of reengineering is to improve operational performance and reduce costs by
a. introducing new processes c. replacing traditional procedures
b. automating thus eliminating manual procedures d. identifying and eliminating non-value
added tasks

31. What does the edit program do in order to reflect any changes due to the removal of error records?
a. automatically calculates for each batch stored on the file
b. validates transactions by testing each record for clerical and logical errors
c. recalculates the batch control totals
d. none of the above

32. In the Sales Order Processing with Batch Technology, part of the end-of-day procedures is to generate
management reports. Which of the following is NOT a computer generated report?
a. error record listings
b. transaction listings
c. inventory status reports
d. sales summaries

33. In the edit run, errors are detected and removed from the batch and copied to a separate error file. There
are typical tests to detect errors. Which of the following is NOT a typical test?
a. range tests b. cost-times-quantity extensions c. field checks d. limit tests

34. Reengineering the sales order processes with real-time technology is an attractive option for many
organizations because it can significantly reduces operating costs while increasing revenues. This approach
has several advantages. Which of the following is NOT as an advantage?
a. reduces amount of paper documents in a system
 b. gives a competitive advantage in the marketplace
c. greatly shortens the inventory cycle of the firm
d. real-time editing identifies errors as they occur

35. In the update procedures of the sales order processing with Real-Time Technology, where does the
remittance advice come from?
a. customer b. mail room c. cash receipts department d. none of the above

36. Still in the update procedures of the sales order processing with Real-Time Technology, where does the
remittance list emanate?
a. Cash receipts department
b. customer
c. Data processing department
d. mail room

37. Still in the update procedures of the sales order processing with Real-Time Technology, at the end of the
day, reconciliation is being performed, one of which is the reconciliation of the transaction listing by the
accounts receivable clerk. What is the basis of the AR clerk in doing his reconciliation?
a. journal voucher b. remittance list c. remittance advice d. deposit slip

38. If the cash receipts procedures are reengineered, there is a process in the mail room being performed by
a machine which can automatically opens envelopes and separates their contents into remittance advice
and checks. It has a special transaction validation software, which is an artificial intelligence, capable of
a. reading handwriting b. analyzing the transaction c. sorting documents d. none of these

39. Only cash, checks and bank credit card sales are valid.
a. Electronic Data Interchange c. Internet
b. Sales Order Processing with Real-Time Technology d. Point of Sales System

40. It is more than just a technology and requires little or no human involvement.
a. Internet c. Sales Order Processing with Real-Time Technology
b. Electronic Data Interchange d. Point of Sales System

41. There are things that manufacturers and wholesales have to agree and have them codified in a trading
partner agreement in order to use of EDI technology. Which of the following seemingly NOT considered as
an agreement between the users?
a. payment terms b. selling price c. qualities to be sold d. guaranteed delivery times

42. They are credit card transactions.

a. Electronic Data Interchange c. Internet
b. Sales Order Processing with Real-Time Technology d. Point of Sales System

43. There controls being considered for computer-based system. In the PC-based accounting systems,
there are also control issues. Which of the following is NOT a control issue of the latter?
a. accounting records b. segregation of duties c. supervision d. access control

44. Reengineering the sales order processes with real-time technology is an attractive option for many
organizations because it can significantly reduces operating costs while increasing revenues. This approach
has several advantages. Which of the following is NOT as an advantage?
e. reduces amount of paper documents in a system
f. gives a competitive advantage in the marketplace
g. greatly shortens the inventory cycle of the firm
h. real-time editing identifies errors as they occur

45. In the update procedures of the sales order processing with Real-Time Technology, where does the
remittance advice come from?
b. customer b. mail room c. cash receipts department d. none of these

46. Still in the update procedures of the sales order processing with Real-Time Technology, where does the
remittance list emanate?
e. Cash receipts department
f. customer
 g. Data processing department
h. mail room

47. Still in the update procedures of the sales order processing with Real-Time Technology, at the end of the
day, reconciliation is being performed, one of which is the reconciliation of the transaction listing by the
accounts receivable clerk. What is the basis of the AR clerk in doing his reconciliation?
b. journal voucher b. remittance list c. remittance advice d. deposit slip

48. If the cash receipts procedures are reengineered, there is a process in the mail room being performed by
a machine which can automatically opens envelopes and separates their contents into remittance advice
and checks. It has a special transaction validation software, which is an artificial intelligence, capable of
b. reading handwriting b. analyzing the transaction c. sorting documents d. none
of the above

49. There are things that manufacturers and wholesales have to agree and have them codified in a trading
partner agreement in order to use of EDI technology. Which of the following seemingly NOT considered as
an agreement between the users?
b. payment terms b. selling price c. qualities to be sold d. guaranteed delivery times

50. There controls being considered for computer-based system. In the PC-based accounting systems,
there are also control issues. Which of the following is NOT a control issue of the latter?
b. accounting records b. segregation of duties c. supervision d. access control