Expenditure Cycle Activities and Accounts Payable
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Questions and Answers

What is the primary advantage of implementing sufficient computer controls in the expenditure cycle?

  • To reduce the number of manual orders placed.
  • To increase manual intervention in the ordering process.
  • To eliminate the need for a purchasing department.
  • To streamline ordering procedures and minimize errors. (correct)

    • Which alternative method of ordering inventory entirely automates the process without physical documents?

  • Alternative two, which still involves human review post-ordering.
  • Alternative one, which involves review by the purchasing department.
  • Alternative three, utilizing electronic data interchange (EDI). (correct)
  • A traditional manual method with physical documentation.

    • In alternative two of the ordering process, what is the main change compared to alternative one?

  • It requires multiple approvals from external vendors.
  • It necessitates manual intervention to confirm orders.
  • It involves using physical purchase orders for all transactions.
  • It eliminates the purchasing department's review step. (correct)

    • What impact does manual intervention have on the ordering process?

    <p>It creates potential delays due to error correction.</p> Signup and view all the answers

    What characteristic is common to all three alternative methods for authorizing and ordering inventories?

    <p>They consolidate authorization and ordering steps using computer systems.</p> Signup and view all the answers

    What is the primary purpose of the Blind Copy in the purchasing process?

    <p>To facilitate the review and distribution of purchase orders</p> Signup and view all the answers

    In Alternative 3 of the inventory ordering procedures, how is the purchase order sent to the vendor?

    <p>Through an electronic transfer directly to the vendor's system</p> Signup and view all the answers

    What is the role of the Data Processing Department in the purchasing flow?

    <p>To prepare and manage purchase orders and related files</p> Signup and view all the answers

    Which alternative includes a transaction list filed for future reference?

    <p>Alternative 1</p> Signup and view all the answers

    How does the purchasing procedure ensure order accuracy before sending to the vendor according to Alternative 2?

    <p>By conducting a final review of the open purchase order</p> Signup and view all the answers

    Study Notes

    Expenditure Cycle Activities and Technologies

    • The ordering process can be automated using computer systems, allowing for more efficient purchasing procedures.
    • Three alternative approaches for authorizing and ordering inventories:
      • Alternative 1: System prepares purchase orders, reviewed by the purchasing department, and then sent to vendors.
      • Alternative 2: System distributes purchase orders directly to vendors, bypassing the purchasing department.
      • Alternative 3: Electronic Data Interchange (EDI) system, where computer systems of buyers and sellers are connected, automating the entire ordering process.

    Modern Systems for Accounts Payable

    • In a modern accounts payable system, vendors' invoices are used to create a voucher.
    • This typically involves several steps:
      • Matching a vendor invoice with a receiving report and a purchase order.
      • Storing these documents in a voucher file.
      • Entering data from the voucher file into the computer system.
      • Creating a cash disbursement voucher with a voucher number.
    • The system uses the cash disbursement voucher generated from the voucher file for check writing.
    • The system is designed to ensure the authenticity of vendors and the accuracy of payments.
    • The system provides controls to prevent unauthorized payments by comparing vendor numbers against a valid vendor file.
    • To mitigate vulnerabilities related to automated check signing, firms may set a materiality threshold, requiring manual signing for payments above the threshold.

    Payroll Systems

    • Payroll systems are often integrated with the Human Resource Management (HRM) system, capturing and processing various personnel-related data, including employee benefits, labor resource planning, employee relations, employee skills, personnel actions, as well as payroll.
    • The HRM system should support real-time access to personnel files.
    • Payroll systems can leverage batch processing and sequential files, which are suitable for less frequent payroll runs (weekly or monthly).
    • Batch processing payroll can be a cost-effective method of processing payroll data, as it allows for efficient processing of large amounts of data at once.
    • Example of a batch payroll system: The data processing department receives personnel action forms and time cards and converts them to sequential files. Batch computer programs perform the detailed record-keeping, check-writing, and general ledger functions.

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    Related Documents

    Auditing the Expenditure Cycle - Chapter 10 PDF

    Description

    Explore the automation and technologies involved in the expenditure cycle, particularly focusing on the ordering process and modern accounts payable systems. Understand the different approaches for authorizing orders and the mechanics of vendor invoice management.

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