Are vendor invoices for materials purchases approved for payment by someone who is independent of the cash disbursements function?
Are details of payments for materials balanced to the total posted to the general ledger?
Are approved requistions required when materials are released from the company's warehouse into production?
Are signed checks for materials purchased mailed promptly without being returned to the department responsible for processing the disbursement?
Using physical inventory counts as a basis for adjusting the perpetual records
Performing a match of the purchase request, receiving report, and purchase order before payment is approved
Performing regular comparisons of perpetual records with recent costs of inventory items
Using a just-in-time system to keep inventory levels at a minimum
Supplies of relatively low value are expensed when acquired.
The stores function is responsible for updating perpetual records whenever inventory items are moved.
Perpetual records are maintained for inventory items only if they are significant in value.
Supplies are physically counted on a cycle basis, whereby limited counts occur quarterly and each item is counted at least once annually.
Determine the quantity of inventory sold.
Compare the physical count with the perpetual records.
Determine the quantity of inventory in process.
Compare the physical count with the periodic records.
Increased efficiency and flexibility
Automatic computation of materials requirements
Increased sales and cost of sales
Early error detection and increased accuracy
Material resource planning (MRP)
First-in, first-out (FIFO)
The economic order quantity (EOQ)
The sale of bonds
The sale of stock
The write-off of bad debts
The purchase of marketable securities
Source of capital processes will result in potential dividend or interest payments.
The fact that these transactions and processes cannot occur without oversight by top management means other controls are not necessary.
These processes should not be initiated unless there is specific authorization by management at a top level.
Retirement of debt is a source of capital process.
Chief accounting officer (CAO).
Chief executive officer (CEO).
Internal controls aimed at preventing and detecting employee fraud in capital and investment processes are not as effective.
Top management fraud, rather than employee fraud, is more likely to occur.
Because of top management oversight, the auditor need not review these processes.
Any fraud is likely to involve manipulating capital and investment processes.
Nonroutine transactions are recorded in a special journal.
Nonroutine transactions are entered in the general journal.
Nonroutine transactions are recorded in a subsidiary ledger.
Routine transactions are recorded in the general journal.
Reconciling a subsidiary ledger to the general ledger can help to detect errors or fraud.
Total balances in a subsidiary ledger should always equal the balance in the corresponding general ledger account.
The general ledger maintains details of subaccounts.
Control is enhanced by separating the subsidiary ledger from the general ledger.
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