Question

Which one of the following situations represents a strength in the internal control for purchasing and accounts payable?

A. Inventory requirements are determined by the purchasing department
B. Invoices are approved for payment by the cash disbursement department
C. Receiving reports are prepared from the packing slip to avoid errors
D. Vendors invoices are matched against POs and receiving reports before a liability is recorded
E. The AP department reconciles the accounts payable subsidiary ledger with the general ledger AP control account.

Answer 1

The strength in the internal control for purchasing and accounts payable is represented by situation D, matching vendors invoices against POs and receiving reports.

Step-by-step explanation:

The correct answer is D. Vendors invoices are matched against POs and receiving reports before a liability is recorded. This situation represents a strength in the internal control for purchasing and accounts payable because it ensures that the company only records a liability for goods or services that have been received and properly authorized. Matching invoices against purchase orders (POs) and receiving reports helps to prevent errors and fraud. It ensures that the company is paying for the correct amount of goods or services and that the items have been received as expected. For example, if an invoice does not match the PO or receiving report, it may indicate that the company is being charged for goods or services that were not actually received, or that the amount on the invoice is incorrect. By catching these discrepancies before recording a liability, the company can avoid overpaying or paying for goods or services it did not receive.