which they lack authorization.

CHAPTER 4: Revenue Cycle Test 31. Application integrity is achieved through the systems
Bank development and program change processes.

TRUE OR FALSE MULTIPLE CHOICE

1.The packing slip is also known as the shipping notice. 1. The revenue cycle consists of
2. The bill of lading is a legal contract between the buyer a. one subsystem–order entry
and the seller. b. two subsystems–sales order processing and cash receipts
3. Another name for the stock release form is the picking c. two subsystems–order entry and inventory control
ticket. d. three subsystems–sales order processing, credit
4. Warehouse stock records are the formal accounting authorization, and cash receipts
records for inventory. 2. The reconciliation that occurs in the shipping department
5. The purpose of the invoice is to bill the customer. is intended to ensure that
6. In most large organizations, the journal voucher file has
a. credit has been approved
replaced the formal general journal.
b. the customer is billed for the exact quantity shipped
7. The cash receipts journal is a special journal.
8. In the revenue cycle, the internal control “limit access” c. the goods shipped match the goods ordered
applies to physical assets only. d. inventory records are reduced for the goods shipped
9. In real-time processing systems, routine credit 3. The adjustment to accounting records to reflect the
authorizations are automated. decrease in inventory due to a sale occurs in the
10. In a computerized accounting system, segregation of a. warehouse
functions refers to inventory control, accounts b. shipping department
receivable, billing, and general ledger tasks. c. billing department
11. A written customer purchase order is required to trigger d. inventory control department
the sales order system. 4. Which document triggers the revenue cycle?
12. Inventory control has physical custody of inventory. a. the sales order
13. The principal source document in the sales order system b. the customer purchase order
is the sales order.
c. the sales invoice
14. Sales orders should be prenumbered documents.
d. the journal voucher
15. Integrated accounting systems automatically transfer
data between modules. 5. Copies of the sales order can be used for all of the
16. If a customer submits a written purchase order, there is following except
no need to prepare a sales order. a. purchase order
17. Sales return involves receiving, sales, credit, and billing b. credit authorization
departments, but not accounts receivable. c. shipping notice
18. A remittance advice is a form of turn-around document. d. packing slip
19. A bill of lading is a request for payment for shipping 6. The purpose of the sales invoice is to
charges. a. record reduction of inventory
20. In point of sale systems, authorization takes the form of b. transfer goods from seller to shipper
validation of credit card charges. c. bill the customer
21. The warehouse is responsible for updating the inventory d. select items from inventory for shipment
subsidiary ledger.
7. The customer open order file is used to
22. In a manual system, the billing department is responsible
a. respond to customer queries
for recording the sale in the sales journal.
23. The stock release document is prepared by the shipping b. fill the customer order
department to provide evidence that the c. ship the customer order
goods have been released to the customer. d. authorize customer credit
24. The accounts receivable clerk is responsible for updating 8. The stock release copy of the sales order is not used to
the AR Control accounts to reflect each a. locate and pick the items from the warehouse shelves
customer sale. b. record any out-of-stock items
25. When customer payments are received, the mailroom c. authorize the warehouse clerk to release custody of the
clerk sends the checks to the cash receipts clerk and the inventory to shipping
remittance advices to the AR clerk. d. record the reduction of inventory
26. Physical controls are imbedded in computer systems to 9. The shipping notice
control access to data. a. is mailed to the customer
27. Process controls are controls over the logic of the
b. is a formal contract between the seller and the shipping
application.
company
28. In a basic technology revenue cycle system, a robust
passwold control policy should be implemented. c. is always prepared by the shipping clerk
29. In an integrated cash receipts system, the cash receipts d. informs the billing department of the quantities shipped
clerk reconciles the checks and the remittance advices and 10. The billing department is not responsible for
prepares deposit slips. a. updating the inventory subsidiary records
30. Multilevel security employs programmed techniques that b. recording the sale in the sales journal
permit simultaneous access to a central c. notifying accounts receivable of the sale
system by many users with different access privileges but d. sending the invoice to the customer
allows them to obtaining information for 11. Customers should be billed for back-orders when
a. the customer purchase order is received c. credit is authorized
b. the backordered goods are shipped d. inventory to be shipped is not stolen
c. the original goods are shipped 20. Which control does not help to ensure that accurate
d. customers are not billed for backorders because a records are kept of customer accounts and inventory?
backorder is a lost sale a. reconcile accounts receivable control to accounts
12. Usually specific authorization is required for all of the receivable subsidiary
following except b. authorize credit
a. sales on account which exceed the credit limit c. segregate custody of inventory from record keeping
b. sales of goods at the list price d. segregate record keeping duties of general ledger from
c. a cash refund for goods returned without a receipt accounts receivable
d. write off of an uncollectible account receivable 21. Internal controls for handling sales returns and
13. Which of following functions should be segregated? allowances do not include
a. opening the mail and making the journal entry to record a. computing bad debt expense using the percentage of
cash receipts credit sales
b. authorizing credit and determining reorder quantities b. verifying that the goods have been returned
c. maintaining the subsidiary ledgers and handling customer c. authorizing the credit memo by management
queries d. using the original sales invoice to prepare the sales returns
d. providing information on inventory levels and reconciling slip
the bank statement 22. The printer ran out of preprinted sales invoice forms and
14. Which situation indicates a weak internal control several sales invoices were not printed.
structure? The best internal control to detect this error is
a. the mailroom clerk authorizes credit memos a. a batch total of sales invoices to be prepared compared to
b. the record keeping clerk maintains both accounts the actual number of sales
receivable and accounts payable subsidiary ledgers invoices prepared
c. the warehouse clerk obtains a signature before releasing b. sequentially numbered sales invoices
goods for shipment c. visual verification that all sales invoices were prepared
d. the accounts receivable clerk prepares customer d. none of the above will detect this error
statements every month 23. Which department prepares the bill of lading?
15. The most effective internal control procedure to prevent a. sales
or detect the creation of fictitious credit memoranda for b. warehouse
sales returns is to c. shipping
a. supervise the accounts receivable department d. credit
b. limit access to credit memoranda 24. A remittance advice is
c. prenumber and sequence check all credit memoranda a. used to increase (debit) an account receivable by the cash
d. require management approval for all credit memoranda received
16. The accounts receivable clerk destroys all invoices for b. is a turn-around document
sales made to members of her family and does not record the c. is retained by the customer to show proof of payment
sale in the accounts receivable subsidiary ledger. Which d. none of the above
procedure will not detect this fraud? 25. A weekly reconciliation of cash receipts would include
a. prenumber and sequence check all invoices comparing
b. reconcile the accounts receivable control to the accounts a. the cash prelist with bank deposit slips
receivable subsidiary ledger b. the cash prelist with remittance advices
c. prepare monthly customer statements c. bank deposit slips with remittance advices
d. reconcile total sales on account to the debits in the d. journal vouchers from accounts receivable and general
accounts receivable subsidiary ledger ledger
17. Which department is least likely to be involved in the 26. At which point is supervision most critical in the cash
revenue cycle? receipts system?
a. credit a. accounts receivable
b. accounts payable b. general ledger
c. billing c. mail room
d. shipping d. cash receipts
18. Which document is included with a shipment sent to a 27. EDI trading partner agreements specify all of the
customer? following except
a. sales invoice a. selling price
b. stock release form b. quantities to be sold
c. packing slip c. payment terms
d. shipping notice d. person to authorize transactions
19. Good internal controls in the revenue cycle should 28. A cash prelist is
ensure all of the following except a. a document that records sales returns and allowances
a. all sales are profitable b. a document returned by customers with their payments
b. all sales are recorded
c. the source of information used to prepare monthly 38. All of the following are advantages of real-time
statements processing of sales except
d. none of the above a. The cash cycle is shortened
29. An advantage of real-time processing of sales is b. Paper work is reduced
a. the cash cycle is lengthened c. Incorrect data entry is difficult to detect
b. current inventory information is available d. Up-to-date information can provide a competitive
c. hard copy documents provide a permanent record of the advantage in the marketplace
transaction 39. Which document is NOT prepared by the sales
d. data entry errors are corrected at the end of each batch department?
30. Commercial accounting systems have fully integrated a. packing slip
modules. The word “integrated” means that b. shipping notice
a. segregation of duties is not possible c. bill of lading
b. transfer of information among modules occurs d. stock release
automatically 40. Which type of control is considered a compensating
c. batch processing is not an option control?
d. separate entries are made in the general ledger accounts a. segregation of duties
and the subsidiary ledgers b. access control
31. The data processing method that can shorten the cash c. supervision
cycle is d. accounting records
a. batch, sequential file processing 41. Which of the following is NOT a common method for
b. batch, direct access file processing achieving multilevel security?
c. real-time file processing a. Access control list
d. none of the above b. Application integrity
32. Which of the following is not a risk exposure in a PC c. Role based access control
accounting system? d. All of the above
a. reliance on paper documentation is increased 42. In an integrated cash receipts system, which of the
b. functions that are segregated in a manual environment following is not a task of the mail room clerk?
may be combined in a a. Prepare deposit slips
microcomputer accounting system b. Open envelopes
c. backup procedures require human intervention c. Prepare remittance list
d. data are easily accessible d. Make bank deposit
33. Which journal is not used in the revenue cycle?
a. cash receipts journal SHORT ANSWER
b. sales journal 1. Distinguish between a packing slip, shipping notice, and a
c. purchases journal bill of lading.
d. general journal ANS:The packing slip travels with the goods to the
34. Periodically, the general ledger department receives all customer, and it describes the contents on the order. Upon
filling
of the following except
the order, the shipping department sends the shipping notice
a. total increases to accounts receivable
to the billing department to notify them that the order has
b. total of all sales backorders been filled and shipped. The shipping notice contains
c. total of all sales additional information that the packing slip may not contain,
d. total decreases in inventory such as shipment date, carrier and freight charges. The bill
35. The credit department of lading is a formal contract between the seller and the
a. prepares credit memos when goods are returned transportation carrier; it shows legal ownership and
b. approves credits to accounts receivable when payments responsibility for assets in transit.
are received
c. authorizes the granting of credit to customers 2. State two specific functions or jobs that should be
d. none of the above segregated in the sales processing system.
36. Adjustments to accounts receivable for payments ANS:sales order processing and credit approval; inventory
received from customers is based upon control (record keeping) from warehouse (custody); and
general ledger from accounts receivable subsidiary ledger
a. the customer’s check
b. the cash prelist
3. State two specific functions or jobs that should be
c. the remittance advice that accompanies payment segregated in the cash receipts system.
d. a memo prepared in the mailroom ANS:cash receipts (custody) from accounts receivable
37. The revenue cycle utilizes all of the following files (record keeping); and general ledger from accounts
except receivable subsidiary ledger; mail room (receiving cash) and
a. credit memo file accounts receivable subsidiary ledger
b. sales history file
c. shipping report file 4. List two points in the sales processing system when
d. cost data reference file authorization is required.
ANS:Credit check, sales returns policy, preparation of cash
prelist
 12. A credit sale is made to a customer, even though the
5. For the revenue cycle, state two specific independent customer’s account is four months overdue.Describe a
verifications that should be performed. specific internal control procedure that would prevent this
ANS:Shipping verifies that the goods sent from the from happening.
warehouse are correct in type and quantity.Billing reconciles ANS: Perform a credit check and require management
the shipping notice with the sales order to ensure that approval for all sales to accounts that are overdue.
customers are billed only for the quantities shipped. 13. What specific internal control procedure would prevent a
customer from being billed for all 50
General ledger reconciles journal vouchers submitted by the items ordered although only 40 items were shipped?
billing department (sales journal), ANS: Billing should reconcile the shipping report with the
inventory control (inventory subsidiary ledger), and cash sales order.
receipts (cash receipts journal).
Treasurer determines that all cash received got to the bank. 14. What specific internal control procedure would prevent
the shipping clerk from taking goods from the storeroom
6. What task can the accounts receivable department engage and sending them to someone who had not placed an order?
in to verify that all checks sent by customers have been ANS: Shipping clerk should not have access to the
appropriately deposited and recorded? storeroom.
ANS: The company should periodically, perhaps monthly,
send an account summary to each customer listing invoices 15. What specific internal control procedure would prevent
and amounts paid by check number and date. This form an accounts receivable clerk from issuing a fictitious credit
allows the customer to verify the accuracy of the records. If memo to a customer (who is also a relative) for goods that
any payments are not recorded, they will notify the company were “supposedly” returned from previous sales?
of the discrepancy. These reports should not be handled by ANS: Credit memo should be authorized after verifying the
the accounts receivable clerk or the cashier. return of goods based on evidence from the person
who received the goods.
7. What specific internal control procedure would prevent
the sale of goods on account to a fictitious 16. What specific internal control procedure would prevent
customer? Ans: credit check an increase in sales returns since salesmen were placed on
commission?
8. The clerk who opens the mail routinely steals remittances ANS:Customer credit should be verified by the credit
and checks. Describe a specific internal control procedure department; reduce commissions for sales returns.
that would prevent or detect this fraud.
ANS: supervision (two people) when opening the mail; 17. What specific internal control procedure would detect
customer complaints when monthly statements mailed the misplacement of a sales invoice after preparation and not
mailed to the customer? The invoice was never found.
9. A customer payment of $247 was correctly posted in the ANS: All documents should be prenumbered.
general ledger but was recorded as $274 in the
customer’saccount receivable. Describe a specific internal 18. What function does the receiving department serve in the
control procedure that would detect this error. revenue cycle?
ANS: Reconcile the accounts receivable control account to ANS: The receiving department counts and inspects items
the accounts receivable subsidiary ledger; compare control which are returned by customers. The receiving department
totals of cash received with total credits to A/R subsidiary prepares a return slip of which a copy goes to the warehouse
ledger. for restocking, and a copy goes to the sales order department
so that a credit memo can be issued to the customer.
10. Goods are shipped to a customer, but the shipping
department does not notify billing and the customer never 19. What are the three rules that ensure that no single
receives an invoice. Describe a specific internal control employee or department processes a transaction
procedure that would detect this error. in its entirety.
ANS: Billing department matches the stock release copy of ANS: The three rules that ensure segregation of functions
the sales order (from shipping) to the invoice, ledger, and are:
file copies of the sales order (sent directly to billing), and 1. Transaction authorization should be separate from
then mails the invoice to the customer. After a certain transaction processing.
amount of time has passed, the billing department should 2. Asset custody should be separate from asset record
investigate any unmatched invoice, ledger, and file copies of keeping.
the sales order. 3. The organization structure should be such that the
perpetration of a fraud requires collusion between 2 or more
11. A clerk embezzles customer payments on account and individuals.
covers up the theft by making an adjustment to the accounts
receivable ledger. Describe a specific internal control 20. What is automation and why is it used?
procedure that would prevent this fraud. ANS: Automation involves using technology to improve the
ANS: segregation of duties; do not let one person have efficiency and effectiveness of a task. Automation of the
custody of payments and the ability to make adjustments to revenue cycle is typically used to reduce overhead costs,
the records; all adjustments to accounts receivable records make better credit granting decisions, and better
must be authorized collectoutstanding accounts receivable.

21. What is the objective of re-engineering?

ANS: The objective of re-engineering is to greatly reduce and shipping products to the customer, billing the customer
costs by identifying and eliminating non value- added at the proper time, and correctly accounting for the
tasks and also by streamlining necessary existing processes. transaction.

22. What are the key segregation of duties related to 27. What is the purpose(s) of the stock release document?
computer programs that process accounting ANS: The stock release document (also called the picking
transactions? ticket) is sent to the warehouse to identify the items of
ANS:The tasks of design, maintenance, and operation of inventory that have been sold and must be located and
computer programs need to be segregated. The programmers picked from the warehouse shelves. It also provides formal
who write the original computer programs should not also authorization for warehouse personnel to release the
be responsible for making program changes. Both of these specified items.
functions must also be separate from the daily task of
operating the system.
28. What is the role of the shipping notice?
23. How is EDI more than technology? What unique control ANS: The shipping notice triggers the billing process. When
problems may it pose? the goods are shipped the shipping notice is forwarded to the
ANS: EDI represents a unique business arrangement billing function as evidence that the customer’s order was
between the buyer and seller in which they agree, in filled and shipped. This document conveys pertinent new
advance, to facts such as the date of shipment, the items and quantities
the terms of their relationship on such items as selling price, actually shipped, the name of the carrier, and freight
quantities, delivery times, payment terms and charges.
methods of handling disputes. The terms of agreement are
binding. One problem is ensuring that only valid 29. What is a bill of lading?
transactions are processed. Another risk is that a non-trading ANS: The bill of lading is a formal contract between the
partner will masquerade as a trading partner and seller and the shipping company (carrier) to transport the
access the firm's processing systems. goods to the customer. This document establishes legal
ownership and responsibility for assets in transit.
24. What makes point-of-sale systems different from
revenue cycles of manufacturing firms? 30. What is the purpose of the credit memo?
ANS: In point-of-sale systems, the customer literally has ANS: This document is the authorization for the customer to
possession of the items purchased, thus the inventory is in receive credit for the merchandise returned. A credit
hand. Typically, for manufacturing firms, the order is placed memo may be similar in appearance to a sales order. Some
and the good is shipped to the customer at some later time systems may actually use a copy of the sales order marked
period. Thus, updating inventory at the time of sale is credit memo.
necessary in point-of-sale systems since the inventory is
changing hands, while it is not necessary in manufacturing 31. How is application integrity achieved?
firms until the goods are actually shipped to the customer. ANS: Application integrity is achieved through the systems
Also, POS systems are used extensively in grocery stores, development and program change processes.
department stores, and other types of retail organizations.
Generally, only cash, checks, and bank credit card sales are 32. What is multilevel security?
valid. Unlike manufacturing firms, the organization ANS: Multilevel security employs programmed techniques
maintains no customer accounts receivable. Unlike some that permit simultaneous access to a central system by
manufacturing firms, inventory is kept on the store’s many users with different access privileges but prevents
shelves, not in a separate warehouse. The customers them from obtaining information for which they
personally pick the items they wish to buy and carry them to lack authorization.
the checkout location, where the transaction
begins.Shipping, packing, bills of lading, etc. are not 33. What does EDI technology do?
relevant to POS systems. ANS: EDI technology was devised to expedite routine
transactions between manufacturers and wholesalers, and
25. Give three examples of Access Control in a Point-of- between wholesalers and retailers.
Sale (POS) system.
ANS: Lock on the cash drawer ESSAY
 Internal cash register tape that can be accessed only by 1. When Clipper Mail Order Co. receives telephone and fax
the manager orders, the billing department prepares an invoice. The
 Physical security over the inventory, for example: steel invoice is mailed immediately. A copy of the invoice serves
cables to secure expensive leather coats to as a shipping notice. The shipping department removes
the clothing rack; locked showcases to display jewelry and inventory from the warehouse and prepares the shipment.
costly electronic equipment; magnetic When the order is complete, the goods are shipped. The
tags attached to merchandise that will sound an alarm when clerk checks the customer’s credit before recording the sale
removed from the store. in the general journal and the account receivable subsidiary
Note to Instructor: Some physical security devices could ledger.
also be classified as supervision. The receptionist opens the mail and lists all payments. The
receptionist also handles all customer complaints and
26. Describe the key tasks in the sales order process. prepares sales return forms for defective merchandise. The
ANS: Sales order procedures include the tasks involved in cashier records all cash receipts in the general journal and
receiving and processing a customer order, filling the order makes the appropriate entry in the accounts receivable
subsidiary ledger. The cashier prepares the daily bank are sent to accounts receivable, cash receipts, and general
deposit.Describe at least four internal control weaknesses at ledger departments. This process is complicated when the
Clipper Mail Order Co. organization receives many partial payments, single
ANS: payments covering multiple invoices, or encounters many
no sales order is prepared; clerical errors on the part of customers.
credit should be checked before shipping the items; invoices
are mailed before the goods are shipped; shipping has 5. What role does each of the following departments play in
access to the warehouse; the sales order processing subsystem: sales,
record keeping duties are not segregated (general ledger credit, and shipping? Be complete.
from subsidiary ledger); only ANS: The sales department receives the order information
one person opens the mail; from the customer, either by mail, phone, or in person.
sales return forms are not authorized by management; Information is captured on a sales order form which includes
custody and customer name, account number, name, number and
record keeping duties are not separated; description of items ordered, quantities and unit prices plus
the cashier has custody of cash, makes journal entries, and taxes, shipping info, discounts, freight terms. This form is
maintains A/R ledger; usually prepared in multiple copies that are used for credit
Cashier has custody of cash and handles customer approval, packing, stock release, shipping, and billing.
complaints (e.g., about unrecorded payments). The credit department provides transaction authorization by
approving the customer for a credit sale and returns and
2. How may an employee embezzle funds by issuing an allowances.
unauthorized sales credit memo if the The shipping department receives information from the
appropriate segregation of functions and authorization sales department in the form of packing slip and Shipping
controls were not in place? notice. When the goods arrive from the warehouse, the
ANS: An employee who has access to incoming payments, documents are reconciled with the stock release papers. The
either cash or check, as well as the authorization to issue goods are packed and labeled. The packing slip is included.
credit memos may pocket the cash or check of a payment for The shipping notice is sent to billing. A bill of lading is
goods received. This employee could then issue prepared to accompany the shipment.
a credit memo to this person’s account so that the customer
does not show a balance due. 6. With regard to segregation of duties, rule one is that
transaction authorization and transaction processing should
3. For each of the following documents, describe its be separated. What does this require in the revenue cycle?
purpose, the functional area preparing it, and the key ANS:
data included: sales order, bill of lading, credit memo. Within the revenue cycle, the credit department is separate
ANS:A sales order is used to collect information needed to from the rest of the process. Hence, the
initiate the sales process. It can be a copy of the customer’s authorization of the transaction (granting of credit) is
purchase order prepared by the customer or a document independent. If other people, e.g., sales staff, were
prepared by a member of the sales staff in response to mail, able to authorize credit sales, there would be the temptation
phone or personal contact with the customer. It contains to approve sales to any customer, even those
information about the customer, the type and quantity of known to not be credit worthy.
merchandise being requested, price information, shipping
information, etc.The bill of lading is prepared by the 7. With regard to segregation of duties, rule two is that asset
shipping clerk. It is a formal contract between the seller and custody and record keeping should be
the carrier who will transport the goods to the customer. It separated. What does this require in the revenue cycle?
contains information about the carrier, the customer, ANS: In the revenue cycle, the warehouse has custody of
descriptions of the package(s) being shipped, declared value physical assets while accounting (especially general ledger
of the goods, and information on freight charges,including and inventory control) maintains the records. Also, in the
how much and who will pay.A credit memo is a document cash receipts subsystem, cash receipts has custody of the
authorizing issuance of credit to a customer for returned asset (cash) while general ledger and accounts receivable
goods. It is prepared in the sales department after receipt of keep the records.
a return slip from receiving. It shows the customer’s name,
reason for the return, a list of items and prices, and the total 8. What role does each of the following departments play in
amount of credit. Many credit memos require additional the cash receipts subsystem: mail room,
authorization. cash receipts, accounts receivable, and general ledger? Be
complete.
4. What features of a reengineered cash receipts system ANS: The mail room receives the customer’s payment–
contribute to improved control and reduced usually a check accompanied by a document called a
costs? What complicates the process? remittance advice (which may be a copy of the invoice sent
ANS: A reengineered cash receipts system can include to the customer). Mail clerks separate the two, prepare a
automated mail processing that opens envelopes and cash prelist or remittance list which lists all the payments
separates checks and remittance advices in a manner that received and sends the checks to the cashier and remittance
limits access of the mail room clerk to the checks. Software advices to accounts receivable.
can be used to read the amount of payment and compare to In cash receipts someone (e.g., cashier) restrictively
the amount due, verify that the check has been signed, etc. endorses the checks and records the payments in the cash
“Good” transactions continue through processing, receipts journal. A deposit slip is prepared which
exceptions are handled separately. Checks are sent to the accompanies the checks to the bank.
cash receipts department for deposit, listings of transactions
The accounts receivable department posts from the 13. Describe a credit check in an advanced technology
remittance advices to the customer accounts in the AR system.
subsidiary ledger. ANS: In an advanced technology system, the system logic,
The general ledger department records cash receipts to the not a human being, makes the decision to grant or deny
cash and AR control accounts based on the list from the credit based on the customer’s credit history contained in the
mailroom and the summary report of posting from A/R. credit history file. If credit is denied, the sales clerk should
not be able to force the transaction to continue. However, to
9. For each of the following documents, describe its allow for operational flexibility in unusualcircumstances, the
purpose, the functional area preparing it, and the key data system provides a management override option that may
included: remittance advice, remittance list, deposit slip. only be performed by a supervisor. Any such overrides
ANS:A remittance advice is sent by the customer to should be fully documented in the credit history record and
accompany payment. However, it is often part of or a copy in management reports.
of the invoice previously sent by the billing department after
the goods were shipped.
A remittance list is often called a cash prelist and is
prepared by the mail room clerk to record all cash
received. It accompanies the checks to the cashier.
A deposit slip is prepared by the cashier to accompany the
checks to the bank. This is usually a
preprinted bank form.

10. How is independent verification carried out in a manual

revenue system?
ANS: Independent verification occurs in several
departments as part of the sales order processing system.
The
shipping department verifies that the goods released by the
warehouse for shipment, as shown on the stock
release document, match the packing slip. Billing compares
the shipping notice with the invoice to be sure
customers are billed only for goods shipped. And general
ledger reconciles the journal vouchers prepared by
billing, inventory control, cash receipts, and accounts
receivable. This reconciliation focuses on a match
between what was ordered, what was removed from the
stockroom, what was shipped, what was billed, cash
received, and credit to the customer account.

11. Describe two common methods for achieving multilevel

security.
ANS: Two common methods for achieving multilevel
security are the access control list (ACL) and role based
access control (RBAC). The ACL method assigns
privileges, such as the right to perform computer program
procedures and access data files, directly to the individual.
In large organizations with thousands of employees, this can
become a considerable administrative burden as access
needs constantly change with changes in job responsibilities.
RBAC involves creating standard tasks (e.g., cash receipts
processing) calledroles. Each role is assigned access
privileges to specific data and procedures, such as the right
to add a record to the cash receipts journal. Once a role is
created, individuals are assigned to it. Using this
technique,individuals may be easily added or deleted from
roles as their job responsibilities change. Individuals
assigned to a particular role may not access program
procedures and data that are not specified by that role.

12. What unique control problems does EDI pose?

ANS:EDI poses unique control problems for organizations.
One problem is ensuring that, in the absence of explicit
authorization, only valid transactions are processed. Another
risk is that a trading partner, or someone masquerading as a
trading partner, will access the firm’s accounting records in
a way that is unauthorized by the trading partner agreement.