chapter 4 controls

Question 1

authorization controls of revenue cycle

Answer 1

auth transactions (document), so only valid transactions get processed

auth takes place when…
1. sale made on credit
2. cash refund requested
3. posing cash payment received to customers account (credit memo)

Question 2

credit and sales duties…

Answer 2

must be separate bc then sales person will approve everyone to earn a higher commission

Question 3

3 rules of segregation

Answer 3

1. transaction auth must be separate from processing
2. asset custody separate from asset record keeping
3. org should be structured that fraud would require collusion btwn 2+ members

Question 4

sales order processing

Answer 4

• credit auth separate from sales order process
• inv control separate from warehouse
• AR subledger separate from general ledge control acct

Question 5

cash receipts processing

Answer 5

• cash receipts separate from accounting records
• AR sub-ledger separate from gen ledger

Question 6

supervision

Answer 6

cashiers and mail opening need an open area and people watching (cameras)

Question 7

properly prepared docs

Answer 7

• easy to complete/understand
• timely prepared
• prenumbered

Question 8

access to assets and info

Answer 8

should be limited, dont leave cash unattended

Question 9

independent verification

Answer 9

check for accuracy and completeness

Question 10

verification reconciliation

Answer 10

cash came in, recorded, deposited, reconcile drawer at end of day

Question 11

shipping verifies what from warehouse

Answer 11

goods sent from warehouse are correct in type and quantity

Question 12

warehouse reconciles what docs

Answer 12

stock release do (picking slip) and packing slip

Question 13

billing reconciles what docs

Answer 13

shipping notice with sales invoice

Question 14

general ledger reconciles what

Answer 14

journal vouchers from billing, inv control, cash receipts, and AR

Question 15

input controls

Answer 15

• majority of the controls, used to prevent misstatement from entering system
• focus on quality of transaction data being entered
  ex: checks for missing data, valid data values

Question 16

output controls

Answer 16

reduce risk documents will be misdirected/ lost in transit
= email digital copies to secure mail boxes
- docs physically collected by auth personnel

Question 17

processing controls

Answer 17

focus on logic of application
- error messages
- low stock flag
- file backup
- passwords

Question 18

advanced tech rev cycle

Answer 18

network
- done in real time
- better info bc inventory management and optimize inventory measures

Question 19

as processes evolve

Answer 19

controls need to evolve

Question 20

automating

Answer 20

taking processes done before and computerizing or making them more efficient

Question 21

reengineering

Answer 21

remaking or rethinking the whole process

Question 22

CBAS

Answer 22

computer based accounting systems
- auth
- separation of duties
- supervision
- access controls
- conpensating control

Question 23

compensating control

Answer 23

one control is nonexistent/ not working control, but something down the line makes up for it
–> supervision make up for any inefficiencies
** double check everything is accurate

Question 24

quickbooks

Answer 24

meant for 1 nonaccounting person to do it all
- good for accounting concepts
- bad internal controls
–> no password
–> no separation of duties

** nonaccounting people always put things into RE

Question 25

cash receipts

Answer 25

is a batch process

Question 26

mobile card readers

Answer 26

- can add into price - go to indiv accounts rather than company account (skimming) - tap cards if get close enough --> paypal parking lot: customer tapped and went to personal paypal when letting people in

Question 27

lock box system

Answer 27

subcontract cash receipts system - bank makes list account numbers and what they paid - faster access to $ - superior control for cash receipts