48) All of the following edit checks for online editing of accounts receivable transactions would
probably be included except
A) validity checks on customer ID and invoice numbers.
B) check digit verification on the amount of the sale.
C) closed loop verification on the customer ID.
D) field checks on the values in dollar fields.
49) When a proper segregation of duties exists in the area of handling cash receipts, the ________, who
reports to the ________, actually handles the cash and is not the same person who posts cash receipts to
customer accounts.
A) cashier; treasurer
B) cashier; controller
C) accountant; treasurer
D) accountant; controller
50) In a revenue cycle with proper controls, the ________ who reports to the ________, is not involved
in any cash handling activities.
A) accounts receivable clerk; treasurer
B) accounts receivable clerk; controller
C) cashier; controller
D) cashier; treasurer
51) A serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable
control procedure that address this exposure?
A) shipping errors; reconciliation of sales order with picking ticket and packing slip
B) theft of cash; segregation of duties and minimization of cash handling
C) making sales that turn out to be uncollectible; force sales people to make collection calls on
customers with past due balances
D) poor performance; preparation and review of performance reports
52) Which of the following duties could be performed by the same individual and not violate
segregation of duty controls?
A) handling cash and posting to customer accounts
B) issuing credit memos and maintaining customer accounts
C) handling cash and authorizing credit memos
D) handling cash receipts and mailing vendor payments
53) To prevent the loss of valuable data in the revenue cycle, internal file labels can be used to
A) keep competitors from accessing files.
B) record off-site storage locations.
C) organize the on-site physical storage site.
D) reduce the possibility of erasing important files.
54) The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He
ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the
following error message popped up: “Did you mean to enter a quantity of 1000 for your order?” This
message is the result of a
A) reasonableness test.
B) validity check.
C) limit check.
D) closed-loop verification.
55) The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He
entered all the items and quantities, completed the checkout and payment process, but the following
error message popped up when he tried to exit the site: “Please enter your email address.” This message
is likely the result of a
A) customer relationship management software application.
B) validity check.
C) completeness test.
D) closed-loop verification.
56) Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The
manager of Callow Youth Clothing was entering an order when the following error message popped up:
“Your total order exceeds your available credit. A Credit Department representative will contact you
within 24 hours.” This message is the result of a
A) validity check.
B) reasonableness test.
C) limit check.
D) sign check.
57) In Petaluma, California, electric power is provided to consumers by the Power To The People
Electrical Company, a local co-op. Each month PTTP mails bills to 70,000 households and then
processes payments as they are received. The customers are provided with a remittance advice, which is
a
A) warning that failure to pay by the due date will result in a late charge.
B) confirmation of the firm’s privacy policy.
C) turnaround document.
D) bill.
58) Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy
Company. He is a product packer. The headphones give him computer-generated instructions so he
knows the location of each item and quantity that should be included in the order. These instructions are
the equivalent of a
A) picking ticket.
B) bill of lading.
C) packing slip.
D) sales order.
59) The shipping department at Squishy Things Toy Company follows policies that determine which
carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains
standing agreements with shippers that specify legal responsibility for the shipment while it is in transit.
The terms of the agreements are documented on
A) picking tickets.
B) bills of lading.
C) packing slips.
D) RFID tags.
60) Sad Clown Pajamas is an Internet-based wholesaler. The manager of Callow Youth Clothing
received an order from Sad Clown and found that the wrong product had been shipped. He repackaged
the order and sent it back for a refund. When Sad Clown Pajamas received the returned product, they
mailed a ______ to Callow Youth Clothing’s manager.
A) packing slip
B) letter requesting an explanation
C) remittance advice
D) credit memo
61) A customer service manager at Sad Clown Pajamas, Bob, received a call from the manager at
Callow Youth Clothing, who informed Bob that Callow was entering bankruptcy liquidation and it was
unlikely that they would be able to pay the outstanding balance on their account. Bob should
A) document the phone conversation and forward it to the billing department manager.
B) prepare a credit memo.
C) approve a credit memo.
D) document the phone conversation and forward it to the credit department manager.
62) Because it is the most fungible of all assets, the management of cash has always been the most
difficult of all control issues. The most important of cash controls is
A) minimization of cash handling.
B) lockbox arrangements.
C) segregation of duties.
D) frequent reconciliation of records.
63) A sales clerk at an electronics store scanned the bar code for a low cost set of headphones and then
substituted a high cost set of headphones for his friend, who paid the lower price. Which of the
following controls would best help to prevent this sort of fraud?
A) Use of RFID tags
B) Physical inventory count
C) Segregation of duties
D) Limited physical access to bar codes
64) The accounts receivable management method typically used by credit card companies is
A) balance forward.
B) postbilling.
C) monthly statement.
D) open-invoice.
65) The accounts receivable clerk destroys all invoices for sales made to family and friends and does not
record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the
clerk cash as a”thank you”. Which procedure will not prevent or detect this fraud?
A) Send monthly statements to all customers with balances owed.
B) Reconcile sales invoices in the billing department to the total debits to accounts receivable subsidiary
ledgers.
C) Sequentially prenumber all invoices and prepare a sequence check at the end of each day.
D) Reconcile the accounts receivable control account to the accounts receivable subsidiary ledger.
66) Which of the following poses an internal control problem?
A) Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this
service.
B) Products are released from inventory after a warehouse employee and a shipping clerk both sign the
pick list.
C) Sales representatives have authority to increase customers’ credit limits in $1,000 increments.
D) When customer payments are received in the mail, checks are sent to the cashier’s office and
remittance advices are sent to the accounts receivable department.
67) For sales returns, the least effective control to prevent fraudulent processing of a credit memo is to
A) reconcile total of credit memos to total debits posted to customers’ subsidiary ledgers.
B) require approval for each credit memo by the credit manager.
C) sequentially prenumber all credit memos and perform a sequence check at the end of each day.
D) match each credit memo with a receiving report.
68) Describe the basic revenue cycle activities.
69) Explain how validity checks, completeness tests and reasonableness tests can be implemented to
ensure accuracy of customer orders.
70) Define and describe benefits of a CRM system.
71) How can Electronic Data Interchange (EDI) facilitate the billing and accounts receivable process?
72) Describe typical credit approval procedures.
73) Describe the two methods to manage accounts receivable.
74) Describe cycle billing and identify how an organization might benefit by using cycle billing.
75) Failure to collect cash on credit sales is a threat in the revenue cycle. What controls can be used to
help neutralize this threat?
76) Discuss ways in which technology can be used to streamline cash collections.
77) Describe four threats in the revenue cycle and identify appropriate controls for each threat.
78) Discuss the general control issue of the loss of data, as it relates to the revenue cycle.
79) Explain how to effectively segregate duties in the sales order activity.
80) Discuss the revenue cycle threat of stockouts, carrying costs, and markdowns.
81) You have been hired by a catalog company to computerize its sales order entry process.
Approximately 70% of all orders are received over the telephone by a sales person. The other 30% of
orders are received by a sales person through mail or fax. The catalog company wants the phone orders
processed real-time. The mail and fax orders will be processed in batches of 50 orders. The following
attributes are collected for every sales order:
Customer number (if the order is from a new customer, a new number needs to be assigned)
Customer name
Address
Payment method (credit card for phone and fax orders and check for mailed orders)
Credit card number and expiration date
Items ordered and quantity of each
Unit price of each item ordered
Identify and describe at least ten specific control policies and procedures you will implement for the
sales order process. Be very specific describing the controls and number each new control you suggest.