1. What is the normal procedure for new customers or customers making a purchase that causes their credit limit to be exceeded?:
- routine approval is granted without authorization
- specific approval must be granted by the credit manager
- reject the sale in either case without question
- check the credit bureau for a credit rating on the customer
2. A company uses an invoice method whereby customers typically pay according to each invoice. This is the __________ method.
- monthly statement
- open-invoice
- balance forward
- cycle billing
3.Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The manager of Callow Youth Clothing was entering and order when the following error message popped up: Please enter your email address. This message is the result of a
- validity check.
- reasonableness test.
- limit check.
- completeness test.
4. Which control would be best to prevent payments made to fictitious vendors?
- allow payments only to approved vendors
- restrict access to any payment or approval documents
- have an independent bank reconciliation
- make sure all documents are in order before approving payments
5.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?
- Vendor invoices should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.
- Vendor invoices should be approved for payment by the purchasing manager.
- Purchase orders and receiving reports should be reconciled by the purchasing manager.
- Controls are adequate under the current system.
6. How does a company avoid overbilling customers for items not yet shipped? (Points : 5)
7. Name and describe the two common systems for approving vendor payments. (Points : 5)