SOP Financial SOP 5

Question 1

What is the purpose of a financial SOP's 'delegation of authority' policy?

Accepted Answer

To define which individuals or roles are authorized to commit the organization to financial obligations at specified thresholds

Answer

A delegation of authority policy establishes clear approval hierarchies so financial commitments are made only by appropriately authorized personnel.

Question 2

Under a financial SOP, what is the correct action when a vendor submits an invoice for goods that have not yet been received?

Accepted Answer

Hold the invoice pending confirmation of receipt from the warehouse or receiving department

Answer

Paying for goods before confirming receipt creates risk of loss if the goods are never delivered; the three-way match process requires receipt confirmation.

Question 3

A company's financial SOP requires a 'two-signature rule' for checks above a certain amount. What risk does this control mitigate?

Accepted Answer

The risk of a single employee issuing unauthorized or fraudulent checks

Answer

Requiring two authorized signers on large checks prevents a single employee from being able to unilaterally issue significant fraudulent payments.

Question 4

Which of the following is a red flag that should be addressed in a financial SOP's fraud prevention procedures?

Accepted Answer

A vendor whose address matches an employee's personal address

Answer

A vendor address matching an employee's personal address is a classic indicator of a fictitious vendor scheme, where an employee creates fake vendor records to divert payments.

Question 5

What is the purpose of an 'encumbrance' entry in government or nonprofit financial SOPs?

Accepted Answer

To reserve budget funds for a committed expenditure before the invoice is received

Answer

Encumbrances set aside budget appropriations when a purchase order is issued, preventing the same funds from being committed twice before the invoice arrives.

SOP - Standard Operating Procedures Practice Test

SOP - Standard Operating Procedures Practice Test

SOP Financial SOP 5