Learning Objective 5-7
1) An example of a sound control for inventory is ________.
A) requiring authorization for all purchases
B) verifying that the items received are the items ordered
C) physically protecting the inventory with locked storage rooms
D) all of these
2) Which of the following would be an example of a
WEAKNESS
in controls over inventory?
A) having an employee identify reliable vendors from whom to buy merchandise
B) paying for inventory only after it has been checked that all items were received
C) having the employee who keeps inventory records also make payments for the goods
D) limiting access to inventory by using locked warehouses and storage rooms
3) Which statement below is
TRUE
about the purchase of inventory?
A) Large firms tend to have entire departments for purchasing and for accounts payable.
B) All firms, large and small, need to keep detailed records of what they are buying and paying for.
C) The person who records inventory purchases should not have access to the inventory.
D) All of these statements are true.
4) Which statement below is
Strength
in controls over inventory?
A) Have an employee order the merchandise and also be the one to sign for the delivery of the merchandise ordered.
B) Have the accountant order the merchandise so that the amounts will be accurately reflected in the accounting records.
C) Have the employee who keeps inventory records also make payments for the goods to avoid overpayment of merchandise purchased.
D) The accountant who records inventory purchases should not have access to the inventory.
5) An example of an internal control procedure to protect inventory is to limit access to inventory deliveries to the accountants.
6) An example of an internal control procedure to protect inventory is to prevent the person who records inventory purchases from having access to the inventory.