Reference no: EM131786396

Question 1

Ashland Company's raw materials are kept in a locked stockroom. The stockroom employees are well trained and bonded. Raw materials are removed upon oral authorization. Which of the following identifies a control weakness.
Bonding is a waste of money.
Too many people have access.
Oral authorization is undocumented.
Only one supervisor.

Question 2
All of the following would address internal control weaknesses in Ashland's store room except:
Raw materials should be removed from the storeroom only upon written authorization from an authorized production foreman. The authorization forms should be prenumbered and accounted for, list quantities and job or production number, and be signed and dated.
The authorization forms should be prenumbered.
The forms should be accounted for, list quantities and job or production number, and be signed and dated.
The bonding should be cancelled as it is a waste of money.

Question 3
Ashland's practice of monthly physical inventory counts does not compensate for the lack of a:
perpetual inventory system
periodic inventory system
Supervisor
Clerk

Question 4
Quantities on hand at the end of one month may not be sufficient to last until the next month's count. If the company has taken this into account in establishing reorder levels, then it is carrying too large an investment in inventory.
True
False

Question 5
Requests for purchases of raw materials should come from the production department management and be based on production schedules and quantities on hand per perpetual records.
True
False

Question 6
The accounts payable clerk handles both the purchasing function and payment of invoices. This is an intrenal weakness at Ashland because:
The accounts payable clerk is already too busy.
This is not a satisfactory separation of duties.
The purchasing clerk is already too busy.
No one is checking the purchase order against the invoice.

Question 7
Raw materials are always purchased from the same vendor. This is an internal control weakness because:
Quality is substandard from that one vendor.
That one vendor is slow in shipping the goods.
The purchasing department should be required to obtain competitive bids on all purchases over a specified amount; which helps control costs.
There is the potential to violate the Foreign Corrupts Practices Act.

Question 8
There is no receiving department or receiving report, however, this is not an internal control weakness.
True
False

Question 9
A receiving department should be established. Personnel in this department should count or weigh all goods received and prepare prenumbered receiving reports. These reports should be signed, dated, and controlled. Copies should be sent to the accounting department, purchasing department, and storeroom.
True
False

Question 10
Match the internal control procedure to the error, misstatement or other problem that its is trying to detect or prevent.
• Duties are segregated between the cash payments and cash receipts functions
• Signature plates are kept under lock and key
• Accounting department matches invoices to receiving reports or special authorizations before payment
• Accounting department matches invoices to copies of purchase orders
• Bank reconciliations are performed by someone other than the one who writes the checks and handles cash
• Imprest accounts are used for payroll
A. The separation of duties is meant to safeguard assets
B. Prevention of unauthorized use.
C. Ensures payment for goods or services actually received.
D. Ensures that disbursements are made only for authorized purchases.
E. To assure that checks are issued to employees only.
F. Separation of functions prevents one person from diverting cash assets and subsequently concealing the wrongdoing.