AIS Master Reviewer 1 8 - Accounting Info System Test bank 2
1. Transaction authorization should be separate from transaction processing
2. Asset custody should be separate from asset record keeping.
3. The organization structure should be such that the perpetration of a fraud requires collusion between 2 or more individuals.
20. What is automation and why is it used?
ANS: Automation involves using technology to improve the efficiency and effectiveness of a task.
Automation of the revenue cycle is typically used to reduce overhead costs, make better credit granting decisions, and better collect outstanding accounts receivable.
21. What is the objective of re-engineering?
ANS: The objective of re-engineering is to greatly reduce costs by identifying and eliminating non value-added tasks and also by streamlining necessary existing processes.
22. What are the key segregation of duties related to computer programs that process accounting transactions.
ANS: Response: The tasks of design, maintenance, and operation of computer programs need to be segregated. The programmers who write the original computer programs should not also be responsible for making program changes. Both of these functions must also be separate from the daily task of operating the system.
23. How is EDI more than technology? What unique control problems may it pose?
ANS: EDI represents a unique business arrangement between the buyer and seller in which they agree, in advance, to the terms of their relationship on such items as selling price, quantities, delivery times, payment terms and methods of handling disputes. The terms of agreement are binding. One problem is ensuring that only valid transactions are processed. Another risk is that a non-trading partner will masquerade as a trading partner and access the firm's processing systems.
24. What makes point-of-sales systems different from revenue cycles of manufacturing firms?
ANS: In point-of-sale systems, the customer literally has possession of the items purchased, thus the inventory is in hand. Typically, for manufacturing firms, the order is placed and the good is shipped to the customer at some later time period. Thus, updating inventory at the time of sale is necessary in point-of-sale systems since the inventory is changing hands, while it is not necessary in manufacturing firms until the goods are actually shipped to the customer.
25. Give three examples of Access Control in a Pointof-Sale (POS) system.
ANS: Lock on the cash drawer
Internal cash register tape that can be accessed only by the manager
Physical security over the inventory. The following are examples: Steel cables to secure expensive leather coats to the clothing rack. Locked showcases to display jewelry and costly electronic equipment. Magnetic tags attached to merchandise, which will sound an alarm when removed from the store.
Note to Instructor: Some physical security devices could also be classified as supervision
Chapter 5—The Expenditure Cycle Part I:
Purchases and Cash Disbursements Procedures
TRUE/FALSE
1. Purchasing decisions are authorized by inventory control.
ANS: T
2. The blind copy of the purchase order that goes to the receiving department contains no item descriptions. ANS: F
3. Firms that wish to improve control over cash disbursements use a voucher system. ANS: T
4. In a voucher system, the sum of all unpaid vouchers in the voucher register equals the firm’s total voucher payable balance. ANS: T
5. The accounts payable department reconciles the accounts payable subsidiary ledger to the control account. ANS: F
6. The use of inventory reorder points suggests the need to obtain specific authorization. ANS: F
7. Proper segregation of duties requires that the responsibility approving a payment be separated from posting to the cash disbursements journal. ANS: T
8. A major risk exposure in the expenditure cycle is that accounts payable may be overstated at the end of the accounting year. ANS: F
9. When a trading partner agreement is in place, the traditional three way match may be eliminated. ANS: T
10. Authorization of purchases in a merchandising firm occurs in the inventory control department. ANS: T
11. A three way match involves a purchase order, a purchase requisition, and an invoice. ANS: F
12. Authorization for a cash disbursement occurs in the cash disbursement department upon receipt of the supplier’s invoice. ANS: F
13. An automated cash disbursements system can yield better cash management since payments are made on time. ANS: T
14. Permitting warehouse staff to maintain the only inventory records violates separation of duties. ANS: T
15. A purchasing system that employs electronic data interchange does not use a purchase order. ANS: F
16. Inventory control should be located in the warehouse. ANS: F
17. Inspection of shipments in the receiving department would be improved if the documentation showed the value of the inventory. ANS: F
18. One reason for authorizing purchases is to enable efficient inventory management. ANS: T
19. If accounts payable receives an invoice directly from the supplier it needs to be reconciled with the purchase order and receiving report. ANS: T
20. Supervision in receiving is intended to reduce the theft of assets. ANS: T
MULTIPLE CHOICE
1. The purpose of the purchase requisition is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered
ANS: C
2. The purpose of the receiving report is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered
ANS: B
3. All of the following departments have a copy of the purchase order except
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger
ANS: D
4. The purpose of the purchase order is to
a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. approve payment for goods received
ANS: A
5. The open purchase order file in the purchasing department is used to determine
a. the quality of items a vendor ships
b. the best vendor for a specific item
c. the orders that have not been received
d. the quantity of items received ANS: C
6. The purchase order
a. is the source document to make an entry into the accounting records
b. indicates item description, quantity, and price
c. is prepared by the inventory control department
d. is approved by the end-user department
ANS: B
7. The reason that a blind copy of the purchase order is sent to receiving is to
a. inform receiving when a shipment is due
b. force a count of the items delivered
c. inform receiving of the type, quantity, and price of items to be delivered
d. require that the goods delivered are inspected
ANS: B
8. The receiving report is used to
a. accompany physical inventories to the storeroom or warehouse
b. advise the purchasing department of the dollar value of the goods delivered
c. advise general ledger of the accounting entry to be made
d. advise the vendor that the goods arrived safely
ANS: A
9. When a copy of the receiving report arrives in the purchasing department, it is used to
a. adjust perpetual inventory records
b. record the physical transfer of inventory from receiving to the warehouse
c. analyze the receiving department’s process
d. recognize the purchase order as closed
ANS: D
10. The financial value of a purchase is determined by reviewing the
a. packing slip
b. purchase requisition
c. receiving report
d. supplier’s invoice
ANS: D
11. Which document is least important in determining the financial value of a purchase?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
ANS: A
12. In a merchandising firm, authorization for the payment of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
ANS: C
13. In a merchandising firm, authorization for the purchase of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
ANS: A
14. When purchasing inventory, which document usually triggers the recording of a liability?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
ANS: D
15. Because of time delays between receiving inventory and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above
ANS: A
16. Usually the open voucher payable file is organized by
a. vendor
b. payment due date
c. purchase order number
d. transaction date
ANS: B
17. Which of the following statements is not correct?
a. the voucher system is used to improve control over cash disbursements
b. the sum of the paid vouchers represents the voucher payable liability of the firm
c. the voucher system permits the firm to consolidate payments of several invoices on one voucher
d. many firms replace accounts payable with a voucher payable system
ANS: B
18. In the expenditure cycle, general ledger does not
a. post the journal voucher from the accounts payable department
b. post the account summary from inventory control
c. post the journal voucher from the purchasing department
d. reconcile the inventory control account with the inventory subsidiary summary
ANS: C
19. The documents in a voucher packet include all of the following except
a. a check
b. a purchase order
c. a receiving report
d. a supplier’s invoice
ANS: A
20. To maintain a good credit rating and to optimize cash management, cash disbursements should arrive at the vendor’s place of business
a. as soon as possible
b. on the due date
c. on the discount date
d.by the end of the month
ANS: C
21. The cash disbursement clerk performs all of the following tasks except
a. reviews the supporting documents for completeness and accuracy
b. prepares checks
c. signs checks
d. marks the supporting documents paid
ANS: C
22. When a cash disbursement in payment of an accounts payable is recorded
a. the liability account is increased
b. the income statement is changed
c. the cash account is unchanged
d. the liability account is decreased
ANS: D
23. Authorization for payment of an accounts payable liability is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements
ANS: C
24. Of the following duties, it is most important to separate
a. warehouse from stores
b. warehouse from inventory control
c. accounts payable and accounts receivable
d. purchasing and accounts receivable
ANS: B
25. In a firm with proper segregation of duties, adequate supervision is most critical in
a. purchasing
b. receiving
c. accounts payable
d. general ledger
ANS: B
26. The receiving department is not responsible to
a. inspect shipments received
b. count items received from vendors
c. order goods from vendors
d. safeguard goods until they are transferred to the warehouse
ANS: C
27. The major risk exposures associated with the receiving department include all of the following except
a. goods are accepted without a physical count
b. there is no inspection for goods damaged in shipment
c. inventories are not secured on the receiving dock
d. the audit trail is destroyed
ANS: D
28. When searching for unrecorded liabilities at the end of an accounting period, the accountant would search all of the files except
a. the purchase requisition file
b. the cash receipts file
c. the purchase order file
d. the receiving report file
ANS: B
29. In regards to the accounts payable department, which statement is not true?
a. the purchase requisition shows that the transaction was authorized
b. the purchase order proves that the purchase was required
c. the receiving report provides evidence of the physical receipt of the goods
d. the supplier’s invoice indicates the financial value of the transaction
ANS: B
30. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual inventory method, who determines when to reorder inventory?
a. the inventory control clerk
b. the purchasing department
c. the vendor
d. the computer system
ANS: D
31. Firms can expect that proper use of a valid vendor file will result in all of the following benefits except
a. purchasing agents will be discouraged from improperly ordering inventory from related parties
b. purchases from fictitious vendors will be detected
c. the most competitive price will be obtained
d. the risk of purchasing agents receiving kickbacks and bribes will be reduced
ANS: C
32. In a real-time processing system with a high number of transactions, the best and most practical control over cash disbursements is to have
a. all checks manually signed by the treasurer
b. all checks signed by check-signing equipment
c. checks over a certain dollar amount manually signed by the treasurer
d. checks over a certain dollar amount manually signed by the cash disbursements clerk
ANS: C
33. The document which will close the open purchase requisition file is the
a. purchase order
b. vendor invoice
c. receiving report
d. none of the above
ANS: C
34. Goods received are inspected and counted to
a. determine that the goods are in good condition
b. determine the quantity of goods received
c. preclude payment for goods not received or received in poor condition
d. all of the above
ANS: D
35. If a company uses a standard cost system, inventory records can be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition
ANS: C
36. If a company uses an actual cost system, inventory records can first be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition
ANS: A
37. Copies of a purchase order are sent to all of the following except
a. inventory control
b. receiving
c. general ledger
d. accounts payable ANS: C
38. The receiving report
a. is used to update the actual cost inventory ledger
b. accompanies the goods to the storeroom
c. is sent to general ledger
d. is returned to the vendor to acknowledge receipt of the goods ANS: B
39. A supplier invoice
a. is included with the goods
b. shows what was ordered even if all was not shipped
c. is sent by vendor to accounts payable
d. none of the above
ANS: C
40. The cash disbursement function is
a. part of accounts payable
b. an independent accounting function
c. a treasury function
d. part of the general ledger department
ANS: C
SHORT ANSWER
1. Which internally generated document should be compared to the supplier’s invoice to verify the price of an item?
ANS: purchase order
2. Which internally generated document should be compared to the supplier’s invoice to verify the quantity being billed for?
ANS: receiving report
3. List specific jobs that should be segregated in the purchases processing system.
ANS: inventory control from warehouse, general ledger from accounts payable subsidiary ledger
4. List specific jobs that should be segregated in the cash disbursements system.
ANS: general ledger from accounts payable subsidiary ledger, accounts payable subsidiary ledger from cash disbursements
5. Describe an internal control procedure that would detect that a vendor overcharged for goods delivered.
ANS: Accounts payable should compare the price on the purchase order to the price on the supplier’s invoice. Accounts payable should recalculate the math (extensions and additions) and check all other charges such as freight, tax, etc.
6. Describe an internal control procedure that would prevent payment of a invoice for goods that were never delivered.
ANS: Accounts payable should match every item on every invoice to a receiving report.
7. Describe an internal control procedure that would prevent issuing two checks in payment of the same invoice.
ANS: The supporting documents should be marked “paid” after the check is signed. A computerized system will tag the invoice number as paid.
8. Explain why supervision is so important in the receiving department.
ANS: Receiving department employees have custody of the asset and record keeping responsibilities. Without proper supervision, employees may fail to count and inspect incoming shipments. Without proper supervision, shipments may disappear from the receiving dock before being transferred to the warehouse.
9. What type of error or fraud might happen if the accounts payable ledger is not periodically reconciled to the control account in the general ledger?
ANS: errors in A/P processing would go undetected, overstated payments produce debit balances in A/P.
10. What type of error or fraud might happen if suppliers’ invoices are not compared to purchase orders or to receiving reports before payment?
ANS: payment at higher than anticipated prices, overpayment for goods not received
11. What internal accounting control(s) would be the most effective in preventing a storekeeper from taking inventory home at night? When shortages become apparent, he claims the goods were never received.
ANS: receiving records items received on a receiving report, storekeeper initials receipt of goods
12. Why should the copy of a purchase order, which is sent to receiving, be a “blind” copy?
ANS: to force workers in receiving to count and inspect the goods received
13. What is(are) the purpose(s) of maintaining a valid vendor file?
ANS: Inventories should only be acquired from valid vendors. This control procedure helps to deter the purchasing agent from buying inventories at excessive costs and receiving kickbacks or from buying from an entity in which the purchasing agent has a relationship, such a relative or a friend.
14. Name two major benefits of automating the purchasing effort.
ANS: improved inventory control, better cash management, streamlining the purchasing effort
15. What function or department typically initiates a purchase in a merchandising business?
ANS: Inventory control determines that the level of certain items warrants restocking and sends a purchase requisition to purchasing.
16. Where in the purchasing/cash disbursement functions is access control exercised?
ANS: physical control of inventory and cash, access to documents that control physical assets–such as purchase requisitions, purchase orders, receiving reports, etc.
17. Explain why a three way match may not be required for transactions covered by a trading partner agreement.
ANS: Under a trading partner agreement the parties contractually agree to terms of trade such as price, quantities to be shipped, discounts, and lead times. With these sources of potential discrepancy eliminated, financial information about purchases is known in advance and the vendor’s invoice provides no critical information that cannot be derived from the receiving report. Thus, a three way match is unnecessary.
Chapter 6—The Expenditure Cycle Part II:
Payroll Processing and Fixed Asset
Procedures
TRUE/FALSE
1. Time cards are used by cost accounting to allocate direct labor charges to work in process.
ANS: F
2. The personnel department authorizes changes in employee pay rates.
ANS: T
3. Most payroll systems for mid-size firms use realtime data processing.
ANS: F
4. To improve internal control, paychecks should be distributed by the employee's supervisor.
ANS: F
5. Employee paychecks should be drawn against a special checking account.
ANS: T
6. Because a time clock is used, no supervision is required when employees enter and leave the work place.
ANS: F
7. Inventory control performs the formal record keeping function for fixed assets.
ANS: F
8. The depreciation schedule shows when assets are fully depreciated.
ANS: T
9. Authorization to dispose of fixed assets should be issued by the user of the asset.
ANS: F
10. Work-in-process records are updated by payroll personnel.
ANS: F
11. Ideally, payroll checks are written on a special bank account used only for payroll.
ANS: T
12. The supervisor is the best person to determine the existence of a “phantom employee” and should distribute paychecks.
ANS: F
13. Payroll processing can be automated easily because accounting for payroll is very simple.
ANS: F
14. Timekeeping is part of the personnel function.
ANS: F
15. Fixed asset accounting systems include cost allocation and matching procedures that are not part of routine expenditure systems.
ANS: T
16. Asset maintenance involves only the recording of depreciation charges. Physical improvements are always expensed.
ANS: F
17. Fixed Asset Systems must keep track of the physical location of each asset to promote accountability.
ANS: T
18. Time cards capture the total time an individual worker spends on each production job.
ANS: F
19. Accounting conventions and IRS rules sometime specify the depreciation parameters to be used.
ANS: T
20. The fixed asset disposal report authorizes the user department to dispose of a fixed asset.
ANS: F
MULTIPLE CHOICE
1. The document that captures the total amount of time that individual workers spend on each production job is called a
a. time card
b. job ticket
c. personnel action form
d. labor distribution form
ANS: B
2. An important reconciliation in the payroll system
is
a. general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable
b. personnel compares the number of employees authorized to receive a paycheck
c. production compares the number of hours reported on job tickets to the number of hours reported on time cards
d. payroll compares the labor distribution summary to the hours reported on time cards
ANS: A
3. Which internal control is not an important part of the payroll system?
a. Supervisors verify the accuracy of employee time cards.
b. Paychecks are distributed by an independent paymaster.
c. Accounts payable verifies the accuracy of the payroll register before transferring payroll funds to the general checking accounting.
d. General ledger reconciles the labor distribution summary and the payroll disbursement voucher.
ANS: C
4. Which transaction is not processed in the Fixed Asset System?
a. purchase of building
b. improvement of equipment
c. purchase of raw materials
d. sale of company van ANS: C 5. Depreciation
a. is calculated by the department that uses the fixed asset
b. allocates the cost of the asset over its useful life
c. is recorded weekly
d. results in book value approximating fair market value
ANS: B
6. Depreciation records include all of the following information about fixed assets except
a. the economic benefit of purchasing the asset
b. the cost of the asset
c. the depreciation method being used
d. the location of the asset
ANS: A
7. Which control is not a part of the Fixed Asset System?
a. formal analysis of the purchase request
b. review of the assumptions used in the capital budgeting model
c. development of an economic order quantity model
d. estimates of anticipated cost savings
ANS: C
8. Objectives of the Fixed Asset System do not include
a. authorizing the acquisition of fixed assets
b. recording depreciation expense
c. computing gain and/or loss on disposal of fixed assets
d. maintaining a record of the fair market value of all fixed assets
ANS: D
9. Which of the following is not a characteristic of the Fixed Asset System?
a. Acquisitions are routine transactions requiring general authorization.
b. Retirements are reported on an authorized disposal report form.
c. Acquisition cost is allocated over the expected life of the asset.
d. Transfer of fixed assets among departments is recorded in the fixed asset subsidiary ledger.
ANS: A
10. In the payroll subsystem, which function should distribute paychecks?
a. personnel
b. timekeeping
c. paymaster
d. payroll
ANS: C
11. Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher?
a. cash disbursements
b. cost accounting
c. personnel
d. general ledger
ANS: D
12. Which of the following statements is not true?
a. Routine payroll processing begins with the submission of time cards.
b. Payroll clerks must verify the hours reported on the time cards.
c. Payroll reconciles personnel action forms with time cards and prepares paychecks.
d. Cash disbursements signs paychecks and forwards them to the paymaster for distribution.
ANS: B
13. In a manufacturing firm, employees use time cards and job tickets. Which of the following statements is not correct?
a. Job tickets are prepared by employees for each job worked on, so an employee may have more that one job ticket on a given day.
b. An individual employee will have only one time card.
c. The time reported on job tickets should reconcile with the time reported on time cards.
d. Paychecks should be prepared from the job tickets.
ANS: D
14. Which department is responsible for approving changes in pay rates for employees?
a. payroll
b. treasurer
c. personnel
d. cash disbursements
ANS: C
15. Which of the following situations represents a serious control weakness?
a. Timekeeping is independent of the payroll department.
b. Paychecks are distributed by the employees immediate supervisor.
c. Time cards are reconciled with job tickets.
d. Personnel is responsible for updating employee records, including creation of records for new hires.
ANS: B
16. Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department?
a. to detect a “phantom employee” for whom a check was produced
b. to prevent an absent employee’s check from being lost
c. to avoid paying absent employees for payday
d. to prevent the paymaster from cashing unclaimed checks ANS: A
17. Which of the following is not a reasonable control for fixed assets?
a. Proper authorization is required for acquisition and disposal of fixed assets.
b. Fixed asset records show the location of each asset.
c. Fully depreciated assets are immediately disposed of.
d. Depreciation policies are in writing.
ANS: C
18. Cost accounting updates work-in-process accounts from
a. time cards
b. the labor distribution summary
c. job tickets
d. personnel action forms
ANS: C
19. Payroll uses time card data to do all of the following except
a. prepare the payroll register
b. update employee payroll records
c. prepare the labor distribution summary
d. prepare paychecks
ANS: C
20. Payroll checks are typically drawn on
a. the regular checking account
b. a payroll imprest account
c. a wages payable account
d. petty cash
ANS: B
21. The personnel action form provides authorization control by
a. preventing paychecks for terminated employees
b. verifying pay rates for employees
c. informing payroll of new hires
d. all of the above
ANS: D
22. Accounting records that provide the audit trail for payroll include all of the following except
a. time cards
b. job tickets
c. payroll register
d. accounts payable register
ANS: D
23. Personnel actions forms are used to do all of the following except
a. activate new employees
b. terminate employees
c. record hours worked
d. change pay rates
ANS: C
24. The payroll department performs all of the following except
a. prepares the payroll register
b. distributes paychecks
c. updates employee payroll records
d. prepares paychecks
ANS: B
25. The document that records the total amount of time spent on a production job is the
a. time card
b. job ticket
c. labor distribution summary
d. personnel action form
ANS: C
26. A control technique that can reduce the risk of a
terminated employee being paid is
a. a security camera viewing the time clock
b. the supervisor taking role during the shift
c. paychecks being distributed by an independent paymaster
d. reconciliation of time cards and job tickets
ANS: C
27. Accounts payable
a. signs paychecks
b. prepares the payroll voucher
c. reconciles time cards and employee records
d. distributes paychecks to employees
ANS: B
28. All of the following are processed by the Fixed
Asset System except
a. sale of unneeded equipment
b. purchase of raw materials
c. repair of production equipment
d. purchase of a new plant
ANS: B
29. The Fixed Asset System performs all of the following except
a. determines the need for new assets
b. maintains depreciation records
c. records retirement and disposal of assets
d. tracks the physical location of fixed assets
ANS: A
30. The payroll department performs all of the following except
a. prepares paychecks
b. transfers adequate funds to the payroll imprest account
c. updates employee payroll records
d. prepares the payroll register
ANS: B 31. Depreciation
a. assures that assets are reported at fair market value
b. is discretionary for many firms
c. allocates the cost of an asset over its useful life
d. is the responsibility of the department using the asset
ANS: C
32. The Fixed Asset System is similar to the expenditure cycle except
a. fixed asset transactions are non-routine and require special authorization and controls
b. fixed assets are capitalized, not expensed
c. both a and b
d. none of the above ANS: C
33. Asset maintenance involves
a. the recording of periodic depreciation
b. adjusting the asset records to reflect the cost of physical improvements
c. keeping track of the physical location of the assets
d. all of the above
ANS: D
34. The Fixed Asset Systems does all of the following except
a. records acquisition of assets
b. records improvements to assets
c. estimates the fair market value of assets in service
d. records the disposal of assets
ANS: C
35. Asset disposal
a. occurs as soon as an asset is fully depreciated
b. requires no special authorization
c. automatically initiates the purchase of a replacement asset
d. must follow formal authorization procedures
ANS: D
SHORT ANSWER
1. Describe an internal control procedure that would prevent an employee from punching the time clock for another, absent employee.
ANS: supervision of the time clock at the start of the shift
2. Why should the employee’s supervisor not distribute paychecks?
ANS: A form of payroll fraud involves a supervisor submitting fraudulent time cards for nonexistent employees. The resulting paychecks, when returned to the supervisor are then cashed by the supervisor.
3. Describe an internal control procedure that would prevent a supervisor from stealing the unclaimed paychecks of employees who have been terminated.
ANS: This type of fraud can be reduced or eliminated by using a paymaster to distribute paychecks to employees in person. Any uncollected paychecks are then returned to payroll. Also, mail final paychecks to terminated employees.
4. Why should employee paychecks be drawn against a special checking account?
ANS: A separate imprest account is established for the exact amount of the payroll based on the payroll summary. When the paychecks are cashed, this account should clear leaving a zero balance. Any errors in checks (additional checks or abnormal amounts) would result in a non-zero balance in the imprest account and/or some paycheck would not clear. This will alert management to the problem so corrective action can be taken.
5. Why should employees clocking on and off the job be supervised.
ANS: A form of payroll fraud involves employees clocking the time cards of absent employees. Bysupervising the clocking in and out process, this fraud can be reduced or eliminated.
6. What is a personnel action form?
ANS: The personnel action form provides the payroll department with a list of currently active employees, so that any submission of time cards by supervisors for fictitious or ex-employees will not be processed.
7. In a manufacturing firm, employees typically fill out two different documents regarding their time worked. What are they? Why are there two?
ANS: The two documents are the time card and the job ticket. Two are required because the time card records all the time worked by an employee during the period while the job ticket details the time by project.
8. List two types of authorization required in the Fixed Asset System.
ANS: authorization to purchase the asset and to dispose of the asset
9. List four types of data that appear on a depreciation schedule.
ANS: item description, depreciation method, useful life, date acquired, cost, salvage value, accumulated depreciation, depreciation expense per period, book value
10. Which documents prompt the fixed asset department to create a fixed asset record?
ANS: the receiving report and the disbursement voucher
11. Describe an internal control that would prevent an employee from stealing a computer and then reporting it as scrapped.
ANS: Supervisors must authorize the disposal of the computer. Unless so authorized, the record will continue to show that the employee is responsible for the computer.
12. Describe an internal control that would prevent the payment of insurance premiums on an automobile that is no longer owned by the company.
ANS: Perform an annual physical inventory of fixed assets and adjust the records to reflect assets no longer on hand. Prepare reports about the disposal of assets.
13. Describe an internal control that would prevent the charging of depreciation expense to the maintenance department for a sweeper that is now located in and used by the engineering department.
ANS: Prepare reports about the transfer of fixed assets. Perform an annual physical inventory and note the location of assets. Budget and then hold each department accountable for depreciation expense for assets located in each department.
14. Describe an internal control that would prevent the acquisition of office equipment which is not needed by the firm.
ANS: A higher organizational level or other appropriate person authorizes fixed asset acquisitions; part of the authorization is showing that a need for the asset exists.
15. What negative consequences result when fixed asset records include assets that are no longer owned by the firm?
ANS: On the f