Module 4 (Ch 9-13)

Question 1

Risk and Control: The company’s background check provider does not have an independent internal control report in place.

Answer 1

Risk: Violating employment or privacy laws may result in lawsuits, fines, legal penalties, or reputational damage.
Control: Require vendors with access to confidential information to have an internal control report or perform other vendor risk management procedures prior to engagement

Question 2

Risk and Control: There is no formal process in place for internal/external job posting and recruitment.

Answer 2

Risk: Potential labor regulation compliance issues.
Control: Implement a formal process for internal/external job posting and recruitment

Question 3

Control Owner #1 and #2: Complete payroll processing checklist.

Answer 3

Payroll manager and N/A

Question 4

Control Owner #1 and #2: Review and approve the payroll journal before the distribution of payments.

Answer 4

HR manager and N/A

Question 5

Control Owner #1 and #2: Mail annual tax report (W-2) to each employee for tax filing purposes.

Answer 5

Payroll manager and N/A

Question 6

Control Owner #1 and #2: Conduct an independent review of employees receiving paychecks by comparing the list to other credible employee listings, such as an active company directory.

Answer 6

HR Manager and N/A

Question 7

Control Owner #1 and #2: Provide a payroll calendar to employees.

Answer 7

Payroll manager and N/A

Question 8

Control Owner #1 and #2: Review and sign payroll checks.

Answer 8

Payroll manager and Controller

Question 9

Control Owner #1 and #2: Reconcile list of employees receiving W-2s to employee main table to account for all employees.

Answer 9

Controller and N/A

Question 10

Control Owner #1 and #2: Distribute payroll expense reports to department managers for explanations of significant variances.

Answer 10

Payroll manager and Department manager

Question 11

Control Owner #1 and #2: Perform changes to personal information directly via an online portal.

Answer 11

Employee and HR manager

Question 12

Control Owner #1 and #2: Review and remit payments for payroll withholdings on a timely basis to government agencies.

Answer 12

Accounting manager and N/A

Question 13

Risk: Reconcile the list of employees receiving W-2s to the employee main table to verify that the company accounts for all employees.

Answer 13

Noncompliance with statutory requirements may result in fines, interest payments, and other penalties.

Question 14

Risk associated with the lack of this control: Periodically review physical assets.

Answer 14

Improper use of the asset.

Question 15

Risk associated with the lack of this control: Perform fixed asset reconciliations.

Answer 15

Fixed asset being expensed instead of capitalized.

Question 16

Risk associated with the lack of this control: Initially approve fixed asset purchase.

Answer 16

Fraudulent bidding or approval of non-budgeted items.

Question 17

Risk associated with the lack of this control: Tag fixed assets.

Answer 17

Fixed asset being expensed instead of capitalized.

Question 18

Risk associated with the lack of this control: Have employee review and sign code of conduct.

Answer 18

Fraudulent bidding.

Question 19

Risk associated with the lack of this control: have management review acquisition agreements.

Answer 19

Fraudulent bidding or approval of non-budgeted items.

Question 20

Control Owner #1 and #2: Obtain vendor tax forms.

Answer 20

Director and VP of operations

Question 21

Control Owner #1 and #2: Allow only authorized personnel to access ordering programs.

Answer 21

IT manager and N/A

Question 22

Control Owner #1 and #2: Set limits on the amounts of purchases.

Answer 22

Director and VP of operations

Question 23

Control Owner #1 and #2: Create a receiving location at physical facilities.

Answer 23

Facility manager and N/A

Question 24

Control Owner #1 and #2: Train purchasing employees.

Answer 24

HR manager and N/A

Question 25

Control Owner #1 and #2: Prevent owner of vendor file from selecting vendors.

Answer 25

Purchasing manager and N/A

Question 26

Control Owner #1 and #2: Prevent receiving employees from authorizing purchases.

Answer 26

Director and VP of operations

Question 27

Control Owner #1 and #2: Install cameras in the receiving areas.

Answer 27

Facility manager and N/A

Question 28

Control Owner #1 and #2: Train receiving employees

Answer 28

HR manager and N/A

Question 29

Control Owner #1 and #2: Three-way match a purchase order, receiving report, and vendor invoice.

Answer 29

AP manager and N/A

Question 30

Control owner and area: Annual review of employee performance is performed.

Answer 30

HR Director in all areas

Question 31

Control owner and area: Access to the warehouse is limited to authorized employees only.

Answer 31

COO in Inventory management

Question 32

Control owner and area: Inventory counts are completed on a monthly basis.

Answer 32

CFO in Manufacturing operations

Question 33

Control owner and area: The system creates purchase requisitions and orders electronically based on customer demand.

Answer 33

Automated system control in Inventory management

Question 34

Control owner and area: Production decisions made by management must be based on sales forecasting, product profitability analysis, and inventory management.

Answer 34

CEO in Production planning and scheduling.

Question 35

Control owner and area: The inventory records must be periodically reconciled to the control accounts in the general ledger and to the physical inventory on hand.

Answer 35

CFO in Inventory management

Question 36

Control owner and area: Documented policies and procedures for product safety and quality include roles and responsibilities of inspectors and the handling of exceptions

Answer 36

COO in Quality management

Question 37

Control owner and area: Product costs are standardized and reviewed and revised regularly, in accordance with documented policies and procedures.

Answer 37

CFO in Product cost management

Question 38

Control owner and area: Policies and procedures related to the review, change, and authorization of existing bills of material, operations lists, and production schedules are clearly documented.

Answer 38

COO in Production planning and scheduling

Question 39

Risk: Ensure that a policy for sales cut-off timing is documented and approved.

Answer 39

Improper revenue recognition.

Question 40

Risk: Create programming that calculates sales discounts.

Answer 40

Loss of profit.

Question 41

Risk: Use standard sales contracts that are authorized by management.

Answer 41

Customer dissatisfaction or loss of reputation and penalties.

Question 42

Risk: Do automated matching of sales invoice quantities to shipping information and to the pricing in the sales contract.

Answer 42

Incorrect sales revenue and accounts receivable records and potential misstatement of financial statements.

Question 43

Risk: Automated the creation of monthly statements for customers.

Answer 43

Inflated revenue, incorrect customer accounts, customer dissatisfaction.

Question 44

Risk: Implement a policy that states cash is not accepted and only cards can be used for payment.

Answer 44

Loss of revenue resulting in financial loss.

Question 45

Risk: Check remittance advices against the daily remittance list.

Answer 45

Incorrect accounts receivable records and potential misstatement of financial statements.

Question 46

Risk: Control access to the warehouse.

Answer 46

Customer dissatisfaction, complaints, and financial losses.

Question 47

Risk: Automate the matching of the customer’s name on the sales order to a main data list for customers.

Answer 47

Fraudulent or inappropriate sales.

Question 48

Data, Analytic, or Report: Customers with the same phone number.

Answer 48

Analytic

Question 49

Data, Analytic, or Report: Product description

Answer 49

Data

Question 50

Data, Analytic, or Report: Calculating sales ratios

Answer 50

Analytic

Question 51

Data, Analytic, or Report: Review of shipments without an invoice

Answer 51

Analytic

Question 52

Step name and timing: Receive an order for $5,000 of inventory.

Answer 52

Journalize accounting transactions during reporting period.

Question 53

Step name and timing: Close income summary.

Answer 53

Journalize and post closing entries during reporting period.

Question 54

Step name and timing: Run quarterly TB.

Answer 54

Prepare unadj TB at end of reporting period.

Question 55

Step name and timing: Run finalized general ledgers balances.

Answer 55

Prepare post-closing TB during reporting period.

Question 56

Step name and timing: Record pament for advertising that will start in one month.

Answer 56

Journalize accounting transactions during reporting period.

Question 57

Step name and timing: Run statement of cash flows.

Answer 57

Prepare financial statements at end of reporting period.

Question 58

Step name and timing: Make agreement to purchase new warehouse.

Answer 58

Identify transactions during reporting periods.

Question 59

Step name and timing: Post debit entry to AP and credit entry to cash.

Answer 59

Post JEs to ledgers during reporting period.

Question 60

Step name and timing: Finalize AJEs and run GL balances.

Answer 60

Prepare adj. TB at end of reporting period.

Question 61

Step name and timing: Run statement of owners equity.

Answer 61

Prepare financial statements at end of reporting period.

Question 62

Step name and timing: Close expense accounts.

Answer 62

Journalize and post closing entries during reporting period.

Question 63

Step name and timing: Equipment is bought on a sales terms of 2/10 net 30.

Answer 63

Journalize accounting transactions during reporting period.

Question 64

Job Order Costing

Answer 64

Assigns cost or product to a unique job.

Question 65

Activity-Based Costing

Answer 65

Allocates indirect costs to cost pools.

Question 66

Conventional Cost Accounting

Answer 66

Allocated indirect costs based on volume.

Question 67

Period Costs

Answer 67

Expenses incurred but not part of the cost of the finished product.

Question 68

Control Owner and Area: The system analyzes standard and actual manufacturing costs and variances.

Answer 68

CFO in product cost management

Question 69

Can it be automated? Review reports and data for unusual trends or unexpected results.

Answer 69

No

Question 70

Can it be automated? Match revenue transactions with approved customer orders.

Answer 70

Yes

Question 71

Can it be automated? Provide a reporting hotline where whistleblowers remain anonymous.

Answer 71

No

Question 72

Can it be automated? Segregate billing function from shipping and AR functions.

Answer 72

No

Question 73

When a customer wishes to buy a product, the company receives a _________.

Answer 73

sales order

Question 74

For B2B sales, the main warehouse will receive a ________ which instructs them on the items that have been purchased and need shipped.

Answer 74

picking request

Question 75

To ensure that a customer receives the correct amount due for any purchases, the company sends out a ____________ to the customer.

Answer 75

sales invoice

Question 76

Risk: Some transactions are not recorded in US dollars.

Answer 76

Financial statements that do not comply with GAAP may result in regulatory fines or penalties.

Question 77

Risk: GL accounts do not have clearly assigned account owners.

Answer 77

Reporting complexities may result in financial statements and other reports may be inaccurate, unreliable or not issued in a timely manner.

Question 78

Risk: The company benefits plan is canceled.

Answer 78

Complex and non-routine accounting transactions may result in incorrect recording.

Question 79

Risk: Reviews on the inventory account are not occurring frequently.

Answer 79

Loss of assets due to fraud, theft, negligence, or destruction may result in lack of proper reflection in the financial statements.