No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

AT 06-07 – Transaction Cycles (Part 2)

1. Which of the following statements is incorrect?

A. Information systems must maintain both detail and summary information.

B. Business processes may vary from one company to another.
C. Business processes categorized as expenditure processes are not intended to
be processes that serve customers.
D. Regardless of the extent of computerization, all information systems must
capture data from the transactions within business processes.

2. In a manual system, an adjusting entry would most likely be initially recorded in a

A. General journal
B. General ledger
C. Special journal
D. Subsidiary ledger

3. In documenting information systems, which pictorial method is described as a

method that depicts the actual flow and sequence of events?

A. System flowchart
B. Data flow diagram
C. Process map
D. Entity relationship diagram

4. Common expenditure processes would include all of the following, except:

A. Preparation of a purchase requisition

B. Reception of the goods or services
C. Recording the liability
D. Payment received on account

5. Which of the following documents triggers the start of the purchase to pay
process?

A. Vendor’s invoice
B. Purchase order
C. Receiving report
D. Purchase requisition

6. Which of the following activities is not likely to be performed in the receiving

department?

A. Counting of the goods received

B. Preparing an invoice
C. Preparing the receiving report
D. Inspecting the quality of goods received

1 Page
JABELLAR/AJABINAL/AIBAY/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

7. Which of the following can be a probing question to study the control over
completeness of purchase transactions?

A. Are prenumbered POs, receiving reports, and vouchers used, and are the
entire sequences accounted for?
B. Is an authorized PO required before the receiving department can accept a
shipment or the accounts payable department can record a voucher?
C. Are prenumbered purchase requisitions used, and are they subsequently
matched with vendor invoices?
D. Is there a regular reconciliation of the inventory records with the file of unpaid
vouchers?

8. Which of the following prevents the occurrence of duplicate payments to vendors?

A. Vendor’s invoice is supported by a receiving report

B. Vendor’s invoice is stamped “paid” by the check signer
C. Vendor’s invoice is prenumbered and accounted for
D. Vendor’s invoice is approved for authorized purchases

9. S1: It is necessary for the purchasing department to set up the proper procedures
to avoid problems related to cutoff issues.
S2: Independent reconciliation of the accounts payable subsidiary ledger to the
general ledger control account will help to assure that all inventories has been
properly recorded.
S3: The cash disbursement process must be designed to ensure that the company
appropriately records all accounts payable transactions.

A. True, True, True

B. False, True, True
C. True, False, False
D. False, False, False

10. S1: Designated members of management should be given the responsibility for
authorizing the actual payments and sign their signatures on the face of the check.
S2: In order to institute an automated matching system, all of the relevant files
must exist in the same physical room.
S3: A user who logs in to the computer-based accounting system to enter invoices
should also have access to the portion of the system that would allow her / him to
order goods.

A. False, False, False

B. True, False, False
C. True, True, False
D. False, True, True

11. A computer software technique in which the computer software matches an invoice
to its related purchase order and receiving report is called a(n):

A. Three way matching

B. Document matching
C. Disbursement approval
D. Automated matching

2 Page
JABELLAR/AJABINAL/AIBAY/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

12. This control requires the approval and signature of two authorized persons, which
reduces the risk of significant fraud or error.

A. Double Remittance
B. Duo-Authorization
C. Bi-Sign
D. Dual Signature

13. For a given pay period, the complete listing of paychecks for the pay period is a

A. Payroll ledger
B. Payroll journal
C. Payroll register
D. Paymaster

14. For sustainable risk management, the department that should authorize new
employees for payroll would be

A. Payroll
B. Human resources
C. Cash disbursement
D. General ledger

15. An entity’s payroll department supervisor should not be responsible in

A. Reviewing authorization forms for new employees

B. Comparing the payroll register with the batch transmittal data
C. Authorizing changes in employee pay rates
D. Hiring subordinates to work in the payroll department

16. A “ghost employee” is

A. Hours worked has been exaggerated by an employee

B. False sales have been claimed to boost commission earned
C. Overtime hours have been inflated
D. Someone who does not work for the company receives a paycheck

17. The officer who usually oversees the investing process

A. Controller
B. Treasurer
C. Chief executive officer (CEO)
D. Chief Financial Officer (CFO)

3 Page
JABELLAR/AJABINAL/AIBAY/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

18. Which is a false statement?

A. Total balances in a subsidiary ledger should always equal the balance in the
corresponding general ledger account.
B. The general ledger maintains details of subaccounts.
C. Control is enhanced by separating the subsidiary ledger from the general
ledger.
D. Reconciling a subsidiary ledger to the general ledger can help to detect errors
or fraud.

19. Which is incorrect?

A. Internal controls aimed at preventing and detecting employee fraud in capital

and investment processes are not effective.
B. Because of senior management oversight on administrative processes, the
auditor need not review these.
C. Fraudulent financial reporting, rather than employee fraud, is more likely to
occur.
D. Any fraud is likely to involve manipulating capital and investment processes.

20. General ledger employees should record approved journal vouchers from other
business process, but they should not

A. Authorize any journal voucher

B. Have custody of assets
C. Have recording responsibility for any special journal or subsidiary ledger
D. All of the above

“Motivation gets you going, but discipline keeps you growing. That's the Law of
Consistency. It doesn't matter how talented you are. It doesn't matter how many
opportunities you receive. If you want to grow, consistency is key.”
~ John C. Maxwell

4 Page
JABELLAR/AJABINAL/AIBAY/RBERCASIO/JMAGLINAO/ASARMIENTO