COP Billing, Invoicing & Compliance Standards 3 — Questions and Answers
Question 1: A sales tax exemption certificate submitted by a customer is expired. What should the order processor do before applying the tax exemption?
- Apply the exemption anyway since the customer is a known business
- Request an updated valid exemption certificate from the customer (Correct answer)
- Charge full sales tax and issue a refund later
- Ignore the expiration date if the certificate looks legitimate
Correct answer: Request an updated valid exemption certificate from the customer
An expired exemption certificate does not provide valid protection; the processor must obtain a current certificate before exempting the sale.
Question 2: What is the purpose of a proforma invoice?
- To record a payment received from a customer
- To provide a preliminary document estimating costs before the actual sale is finalized (Correct answer)
- To notify a customer of a past-due balance
- To cancel an existing order
Correct answer: To provide a preliminary document estimating costs before the actual sale is finalized
A proforma invoice is a preliminary bill of sale issued before goods are delivered, used for quotes, customs, or buyer approval.
Question 3: Which element is NOT typically required on a compliant B2B invoice in the United States?
- Invoice number
- Seller's DUNS number (Correct answer)
- Itemized description of goods or services
- Payment due date
Correct answer: Seller's DUNS number
A DUNS number is not a standard required element on a U.S. B2B invoice, though invoice number, itemization, and due date are essential.
Question 4: A customer takes an early payment discount of 2% on an invoice that did not offer early payment terms. How should the order processor respond?
- Accept the partial payment and close the invoice
- Apply the discount to the next invoice automatically
- Contact the customer and request the remaining balance, noting no discount was offered (Correct answer)
- Issue a credit memo for 2% of the invoice
Correct answer: Contact the customer and request the remaining balance, noting no discount was offered
Unauthorized deductions must be addressed; the processor should request the remaining balance and clarify the correct payment terms.
Question 5: Under the Foreign Corrupt Practices Act (FCPA), what invoicing-related practice is strictly prohibited?
- Issuing invoices in foreign currencies
- Creating false or inflated invoices to conceal bribe payments to foreign officials (Correct answer)
- Charging different prices to international customers
- Using electronic invoicing for overseas transactions
Correct answer: Creating false or inflated invoices to conceal bribe payments to foreign officials
The FCPA prohibits using false invoices or fictitious billing as a mechanism to disguise payments made to foreign government officials.
Question 6: What does 'FOB Destination' mean for billing and invoicing purposes?
- The buyer pays freight and takes ownership when goods leave the seller's dock
- The seller retains ownership and pays freight until goods arrive at the buyer's location (Correct answer)
- The carrier is responsible for all invoice disputes
- The buyer is invoiced at the destination country's tax rate
Correct answer: The seller retains ownership and pays freight until goods arrive at the buyer's location
FOB Destination means the seller owns the goods and pays shipping costs until they reach the buyer's facility, affecting when revenue is recognized.
Question 7: Which internal control best prevents duplicate invoice payments in accounts payable?
- Requiring all invoices to be printed in color
- Three-way matching of purchase order, receiving report, and invoice before payment (Correct answer)
- Paying all invoices within 24 hours of receipt
- Allowing any employee to approve invoices under $500
Correct answer: Three-way matching of purchase order, receiving report, and invoice before payment
Three-way matching cross-references the PO, receiving report, and invoice to confirm goods were ordered, received, and correctly billed before payment.
COP Billing, Invoicing & Compliance Standards 3
A sales tax exemption certificate submitted by a customer is expired.
What should the order processor do before applying the tax exemption?