Which of the Following Is an Effective Control That Encourages

question 12

Multiple Choice

Which of the following is an effective control that encourages receiving department personnel to count and inspect all merchandise received?

• A)Quantities ordered are excluded from the receiving department copy of the purchase order.
• B)Vouchers are prepared by accounts payable department personnel only after they match item counts on the receiving report with the purchase order.
• C)Receiving department personnel are expected to match and reconcile the receiving report with the purchase order.
• D)Internal auditors periodically examine,on a surprise basis,the receiving department copies of receiving reports.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

External Financing Needed

The additional funds a company requires from external sources to finance its planned activities or growth when internal cash flows are insufficient.

Profit Margin

A measure of profitability calculated as net income divided by revenues, expressed as a percentage.

Capital Intensity Ratio

A metric that measures the amount of assets required to generate one dollar of revenue; the higher the ratio, the more capital-intensive the business.