The Internal Control Activities Within the Purchasing Process, Related to Authorization

question 25

Multiple Choice

The internal control activities within the purchasing process, related to authorization of transactions, would include which of the following?

• A)The accounting duties related to requisitioning, ordering, and receiving goods should be performed by different individuals.
• B)The custody of inventory and the recording of inventory transactions are required to be maintained.
• C)Specific individuals should be given authoritative responsibility for preparing purchase requisitions and purchase orders which would include which items to purchase, how many items, and which vendor.
• D)Periodic physical inventory counts are to be reconciled with the inventory ledger and general ledger.

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Definitions:

Offset Conditions

Conditions that allow entities to negate or counterbalance one position with another, commonly used in accounting and finance to manage risk or net-off liabilities against assets.

Different Financial Instruments

Various types of investment assets, including stocks, bonds, derivatives, and mutual funds, that provide a way for individuals and businesses to invest, finance operations, or manage risk.

Financial Instrument

A contract that leads to the creation of a financial asset for one party and results in a financial liability or equity instrument for another party.

Market Risk

The risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates, market interest rates or some other market prices.