CPB / BookKeeping Internal Controls and Fraud Prevention 2 — Questions and Answers
Question 1: Which of the following BEST describes the 'three-way match' in accounts payable controls?
- Matching the purchase order, receiving report, and vendor invoice (Correct answer)
- Matching the general ledger, trial balance, and financial statements
- Matching the bank statement, check register, and remittance advice
- Matching the budget, actual spending, and variance report
Correct answer: Matching the purchase order, receiving report, and vendor invoice
The three-way match verifies that the purchase order, receiving report, and vendor invoice all agree before a payment is approved.
Question 2: A bookkeeper who opens mail, records receipts, AND deposits checks violates which control principle?
- Segregation of duties (Correct answer)
- Audit trail
- Physical controls
- Reconciliation
Correct answer: Segregation of duties
Handling all steps of cash receipts without oversight creates an opportunity for theft that segregation of duties would prevent.
Question 3: Which control requires the bank to verify each check number and amount against a company-provided list before paying it?
- Positive pay (Correct answer)
- Stop payment
- ACH block
- Bank reconciliation
Correct answer: Positive pay
Positive pay is a bank fraud prevention service where the bank matches checks presented for payment against the company's authorized list.
Question 4: Physical controls over assets include all of the following EXCEPT:
- Approving journal entries before posting (Correct answer)
- Locking petty cash in a secure drawer
- Restricting access to blank check stock
- Using a safe for negotiable instruments
Correct answer: Approving journal entries before posting
Approving journal entries is an authorization control, not a physical safeguard over assets.
Question 5: Which term describes the practice of requiring employees to take mandatory vacations to help detect fraud?
- Mandatory leave policy (Correct answer)
- Job rotation
- Dual control
- Background check
Correct answer: Mandatory leave policy
Mandatory vacations force another employee to handle duties, which can expose fraudulent schemes that require daily maintenance.
Question 6: Which document should a company use to formally report a discovered employee fraud to management and auditors?
- Incident report (Correct answer)
- Adjusting journal entry
- Bank reconciliation
- Accounts payable aging schedule
Correct answer: Incident report
An incident report formally documents the discovery, details, and evidence of fraud for management review and investigative follow-up.
CPB / BookKeeping Internal Controls and Fraud Prevention 2
Which of the following BEST describes the 'three-way match' in accounts payable controls?