51) What control should be put in place that assigns responsibility for EFT payments made to vendors?
A) Encrypt all EFT transmissions.
B) Time stamp all EFT transactions.
C) Establish a control group to monitor EFT transactions for validity and accuracy.
D) Number all EFT transactions.
52) Which of the following threats is not specific to the purchase requisition process of the expenditure
cycle?
A) stockouts
B) purchasing from unauthorized vendors
C) requisitioning goods not needed
D) All of the above are threats in the purchase requisition process.
53) There is a symmetrical interdependence between a firm’s expenditure cycle and its suppliers’
A) production cycle.
B) revenue cycle.
C) expenditure cycle.
D) general ledger and reporting system.
54) The Squishy Things Toy Company was established in 1948. It recently signed a large contract with a
chain of retail toy stores. As a condition of the contract, the Squishy will be required to track and
forecast product sales by linking in to the chain’s sales database. Squishy will then be responsible for
shipping products to the chain’s regional warehouses as needed. The technology that is used for
communication between Squishy and the chain is
A) vendor-managed inventory.
B) sales force automation.
C) electronic data interchange.
D) optical character recognition.
55) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new
inventory control system. The current system is inadequate because it results in stockouts that interrupt
production and excess stocks of some materials that result in markdowns and high carrying costs. The
new system, which will focus on ensuring that the amounts purchased minimize these costs, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
56) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new
inventory control system. The current system is inadequate because it results in stockouts that interrupt
production and excess stocks of some materials that result in markdowns and high carrying costs. The
new system, which will focus on ensuring that orders are placed with sufficient lead time to prevent
stockouts, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
57) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new
inventory control system. The current system is inadequate because it results in stockouts that interrupt
production and excess stocks of some materials that result in markdowns and high carrying costs. The
new system, which will focus on forecasting demand for Sad Clown’s products, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
58) The management at Sad Clown Pajamas, an Internet-based wholesaler, is considering a new
inventory control system. The current system is inadequate because it results in stockouts that interrupt
production and excess stocks of some materials that result in markdowns and high carrying costs. The
new system, which will focus on reducing or completely eliminating carrying costs, will employ
A) a just-in-time inventory system.
B) the economic order quantity.
C) a reorder point.
D) materials requirements planning.
59) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he
proudly announced that he had negotiated a(n) ________ with a client that defined a long-term
commitment to buy components from Folding Squid.
A) purchase order
B) blanket purchase order
C) evaluated receipt settlement
D) voucher
60) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he
proudly announced that he had received a ________ from a client to buy a large quantity of components
from Folding Squid.
A) purchase order
B) blanket purchase order
C) voucher
D) purchase requisition
61) Bob Chum is the sales manager at Folding Squid Technologies. At lunch with the company CEO, he
complained that a recent shipment from a vendor had been unsatisfactory and so had to be returned. That
required the purchasing manager to send a ________ to the supplier.
A) purchase order
B) blanket purchase order
C) receiving report
D) debit memo
62) To minimize the number of checks that need to be written to pay vendor invoices a company should
use a
A) voucher system.
B) just-in-time inventory system.
C) nonvoucher system.
D) evaluated receipt settlement system.
63) Evaluated receipt settlement increases efficiency by
A) eliminating the need for receiving reports.
B) eliminating the need for vendor invoices.
C) eliminating the need for purchase orders.
D) eliminating the need to prepare and mail checks.
64) In the expenditure cycle, Financial Electronic Data Interchange (FEDI) increases efficiency by
A) eliminating the need for receiving reports.
B) eliminating the need for vendor invoices.
C) eliminating the need for purchase orders.
D) eliminating the need to prepare and mail checks.
65) Procurement cards differ from corporate credit cards in which of the following ways?
A) Credit limits can be set for procurement cards, but not corporate credit cards.
B) Credit cards can be used to make purchases without an explicit sign off by supervisors, but
procurement cards require a sign off.
C) Procurement cards can only be used with approved vendors, but credit cards can be used anywhere.
D) Procurement card invoices are sent separately for each card, whereas corporate credit cards are
consolidated into a single invoice.
66) The purchasing manager at Folding Squid Technologies has responsibility for reviewing and
authorizing purchase orders. He also reviews receiving reports, approves or corrects them, and
authorizes the cashier to pay vendor invoices. Which of the following would correct control weaknesses,
if any, related to these activities?
A) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct.
B) Accounts payable should reconcile purchase orders, receiving reports, and invoices.
C) Vendor invoices should be reviewed by accounts receivable and then cancelled when paid.
D) Controls are adequate under the current system.
67) The purchasing manager at Folding Squid Technologies has responsibility for reviewing and
authorizing purchase orders. Receiving reports are prepared by shipping and receiving based on the
relevant purchase order(s). Purchase orders, receiving reports, and vendor invoices are reconciled by
accounts payable, which authorizes payment. Which of the following would correct control weaknesses,
if any, related to these activities?
A) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct.
B) Accounts payable should authorize purchase orders.
C) Receiving reports should be reviewed and corrected by the purchasing manager.
D) Controls are adequate under the current system.
68) The receiving clerk at Folding Squid Technologies examines incoming shipments and reconciles
their contents with the relevant purchase orders. A receiving report is then sent to accounts receivable
and the vendor’s invoice is approved for payment. Which of the following would correct control
weaknesses, if any, related to these activities?
A) The invoice should be approved for payment by the shipping clerk after the purchase order and
receiving report are reconciled.
B) Accounts payable should reconcile the purchase order and the receiving report.
C) Invoices, purchase orders, and receiving reports should be reconciled by the receiving clerk.
D) Controls are adequate under the current system.
69) The receiving clerk at Folding Squid Technologies examines incoming shipments and checks their
purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with
the relevant purchase orders and invoices and payment is authorized. Which of the following would
correct control weaknesses, if any, related to these activities?
A) Vendor invoices should be approved for payment by the shipping clerk after the purchase order and
receiving report are reconciled.
B) Vendor invoices should be approved for payment by the purchasing manager.
C) Purchase orders and receiving reports should be reconciled by the purchasing manager.
D) Controls are adequate under the current system.
70) Which of the controls below would be least effective to prevent ordering goods at higher than
market prices?
A) Variance analysis of actual expenses to budgeted expenses
B) For high-dollar goods, solicit competitive bids from possible vendors
C) Only place orders with vendors on an approved vendor list
D) Frequent review of, and update to, vendor price lists stored in the AIS
71) The document below would be known as what by Alpha Omega Electronics?
A) Receiving report
B) Purchase order
C) Purchase requisition
D) Packing slip
72) Which of the following would be the best control to prevent receiving department employees from
stealing inventory and claiming the ordered quantity wasn’t received from the vendor?
A) Reconcile quantity on packing slip to physical count when accepting delivery.
B) Restrict physical access to the receiving area.
C) Require all deliveries be made at the receiving area.
D) Require dual signatures on the move ticket when receiving delivers the inventory to the warehouse.
73) Define and describe the EOQ approach to inventory management.
74) Discuss the differences between EOQ, MRP, and JIT.
75) a) What is the major cost driver in the purchasing function? b) Describe how information technology
can be used to control this cost driver.
76) Explain what is meant by the expenditure cycle as a “mirror image” of the revenue cycle.
77) Identify possible problems associated with receiving goods and appropriate actions in response to
the problems.
78) How can information technology be used to improve the vendor invoice approval process?
79) Under what conditions is MRP more suitable than JIT and vice versa?
80) In the expenditure cycle, the majority of payments made are by check. What are some control issues
related to payment of vendors by check?
81) Identify ten threats and applicable control procedures in the expenditure cycle.
82) What types of decision-making and strategic information should the AIS provide in the expenditure
cycle?
83) How can using RFID tags or bar codes on goods or products provide significant benefit in the
expenditure cycle?