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*20 Case-Based MCQs – US CMA Part 1: Section B. Internal Controls + Section A. AIS*
*Topics*: AIS, Revenue Cycle, Expenditure Cycle, Payroll, Procurement, Conversion, Documents, Deliverables
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*Revenue & Sales Cycle*
*Case 1*:
Customer orders 100 units by phone. Sales clerk creates sales order, but no credit check is done. Goods shipped, customer later defaults.
*Q*: Which key document/control was missing?
A. Bill of Lading
B. *Approved Sales Order with credit authorization*
C. Packing Slip
D. Remittance Advice
*Answer: B*
*Why*: Revenue cycle: Order Entry → Credit Approval → Shipping. Credit approval prevents bad debt. Key doc = credit-approved sales order.
*Case 2*:
Warehouse ships goods but shipping dept fails to send shipping notice to billing. Invoice never created.
*Q*: Which document ensures billing occurs?
A. Purchase Order
B. *Bill of Lading/Shipping Document matched to Sales Order*
C. Receiving Report
D. Vendor Invoice
*Answer: B*
*Why*: AIS control: Shipping doc triggers billing. No ship notice = underbilling. Match S/O → B/L → Invoice.
*Case 3*:
Customer sends check + remittance advice. Clerk steals check, destroys remittance advice, laps receivables.
*Q*: Control to prevent?
A. Sales Order
B. *Segregation: Mailroom lists checks, separate person posts to AR*
C. Invoice
D. Bank Reconciliation
*Answer: B*
*Why*: Revenue cycle cash receipts: List checks immediately + separate custody vs recording. Key docs: prelist, remittance advice, deposit slip.
*Case 4*:
Sales return approved by sales manager only. No receiving report. Inventory overstated.
*Q*: Missing document in AIS?
A. Credit Memo
B. *Receiving Report for Sales Returns*
C. Debit Memo
D. Purchase Requisition
*Answer: B*
*Why*: Sales return cycle: RMA → Receiving Report → Credit Memo. Receiving confirms goods returned before inventory + AR adjusted.
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*Expenditure / Procurement Cycle*
*Case 5*:
Dept manager emails vendor directly, vendor ships goods, invoice arrives. No PO issued. A/P pays.
*Q*: Which AIS control violated + missing doc?
A. Three-way match
B. *Authorized Purchase Order before commitment*
C. Receiving Report
D. Vendor Statement
*Answer: B*
*Why*: Procurement cycle: Requisition → Approved PO → Receiving → Voucher. PO authorizes purchase, controls budget.
*Case 6*:
A/P clerk pays invoice without matching to PO + Receiving Report. Goods never received.
*Q*: Control failure?
A. Authorization
B. *Three-Way Match: PO + Receiving Report + Vendor Invoice*
C. Segregation of Duties
D. Physical Safeguards
*Answer: B*
*Why*: Expenditure cycle key control: Match PO, RR, Invoice before voucher. Prevents payment for non-receipt.
*Case 7*:
Receiving clerk both counts goods and updates inventory records. Shortages occur.
*Q*: AIS weakness?
A. No PO
B. *Lack of segregation: custody vs recordkeeping*
C. No invoice
D. No requisition
*Answer: B*
*Why*: Procurement: Receiving = custody. Inventory records = recording. Same person can hide theft.
*Case 8*:
Vendor offers 2/10, n/30. A/P always pays day 30 to “save cash”.
*Q*: AIS deliverable to improve?
A. Vendor Statement
B. *Cash Disbursement Schedule + Discount Lost Report*
C. Aging Report
D. Purchase Journal
*Answer: B*
*Why*: Expenditure cycle: System should flag discounts. Missing discount = 36% annual cost. Deliverable = report of discounts taken/missed.
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*Payroll Cycle*
*Case 9*:
HR enters new employee, also approves timesheet, and distributes checks. Ghost employee found.
*Q*: Violated control + missing docs?
A. Time Card
B. *Segregation: HR add employee, Supervisor approve time, Payroll process, Separate custody of checks*
C. W-4 Form
D. Payroll Register
*Answer: B*
*Why*: Payroll cycle: HR master file, Supervisor authorizes hours, Payroll calculates, Treasury signs/distributes. Key docs: W-4, timecard, payroll register, payroll checks.
*Case 10*:
Overtime not approved. Payroll clerk pays based on timecards only.
*Q*: Missing authorization doc?
A. W-2
B. *Approved Overtime Authorization Form*
C. Earnings Record
D. Direct Deposit Form
*Answer: B*
*Why*: Payroll: Hours must be authorized. Timecard + supervisor overtime approval = key docs before payroll run.
*Case 11*:
Payroll tax deposits late. Penalty incurred.
*Q*: AIS deliverable missing?
A. Payroll Register
B. *Payroll Tax Calendar + Exception Report*
C. 941 Form
D. Check Register
*Answer: B*
*Why*: Payroll cycle: System should generate tax due date alerts. Deliverable = compliance calendar.
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*Conversion / Production Cycle*
*Case 12*:
Production starts without materials requisition. Materials taken from warehouse freely.
*Q*: Key document missing?
A. Job Cost Sheet
B. *Materials Requisition Form authorized*
C. Bill of Materials
D. Production Schedule
*Answer: B*
*Why*: Conversion cycle: BOM = standard, Materials Requisition = actual authorization to move inventory to WIP. Prevents theft.
*Case 13*:
Labor costs posted to wrong job. Job cost overrun not detected.
*Q*: AIS doc to ensure accuracy?
A. Time Ticket
B. *Job Time Ticket matched to Job Cost Sheet*
C. Labor Distribution Report
D. Payroll Register
*Answer: B*
*Why*: Conversion: Labor tracked by job via time ticket → posted to Job Cost Sheet. Deliverable: Job Cost Ledger.
*Case 14*:
Completed goods transferred to FG warehouse but no document. Inventory shortage later.
*Q*: Missing?
A. Sales Order
B. *Completed Production Report / Transfer Ticket*
C. Materials Requisition
D. Packing Slip
*Answer: B*
*Why*: Conversion cycle ends with transfer to FG. Completed goods ticket updates WIP to FG inventory.
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*AIS Controls & Deliverables*
*Case 15*:
System allows sales clerk to enter order, approve credit, print invoice, and post to GL.
*Q*: AIS principle violated?
A. Audit Trail
B. *Segregation of Duties in AIS*
C. Input Controls
D. Output Controls
*Answer: B*
*Why*: AIS: Order entry, credit, billing, GL should be separate modules/users. Prevents fraud.
*Case 16*:
Month-end close takes 15 days because GL not reconciled to subledgers.
*Q*: AIS deliverable needed?
A. Chart of Accounts
B. *Automated Subledger-to-GL Reconciliation Report + Exception Report*
C. Journal Entry Log
D. Trial Balance
*Answer: B*
*Why*: AIS should provide real-time reconciliation. Deliverable = auto-match AR/AP/Inv to GL, list differences.
*Case 17*:
Unauthorized user changes vendor master file bank details. Fraud payment made.
*Q*: Key AIS control?
A. Input Mask
B. *Access Controls + Vendor Master Change Report to A/P Manager*
C. Backup
D. Hash Total
*Answer: B*
*Why*: Expenditure: Vendor master file changes = high risk. Control = restricted access + audit trail report of changes.
*Case 18*:
Invoice data entry: clerk types ₹10,000 as ₹100,000. No check.
*Q*: AIS input control missing?
A. Sequence Check
B. *Limit/Reasonableness Check + Field Check*
C. Validity Check
D. Completeness Check
*Answer: B*
*Why*: Input controls: Limit check flags amount > normal PO. Reasonableness check: ₹100k vs avg ₹10k.
*Case 19*:
CFO asks: “Which customers are over 90 days?”
*Q*: AIS deliverable from revenue cycle?
A. Sales Journal
B. *Aged AR Trial Balance Report*
C. Cash Receipts Journal
D. Customer Statement
*Answer: B*
*Why*: Revenue cycle output: Aged AR = key deliverable for collections + allowance estimate.
*Case 20*:
Company wants to know: “Cost per unit for Job 123”
*Q*: AIS deliverable from conversion cycle?
A. Materials Requisition
B. *Job Cost Sheet / Cost Accounting Report*
C. Production Schedule
D. Labor Time Ticket
*Answer: B*
*Why*: Conversion cycle output: Job Cost Sheet accumulates DM, DL, OH. Deliverable = unit cost for pricing/decisions.
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*Summary Table – Key Documents by Cycle*
Cycle Key Documents Key Deliverable/Report
**Revenue** Sales Order, Credit Approval, Shipping Doc/BOL, Invoice, Remittance Advice Aged AR, Sales Analysis
**Expenditure/Procurement** Purchase Requisition, PO, Receiving Report, Vendor Invoice, Check AP Aging, Discounts Lost Report
**Payroll** W-4, Timecard, Approved OT, Payroll Register, Check/Direct Deposit Labor Distribution, 941 Tax Report
**Conversion** BOM, Materials Req, Job Time Ticket, Completed Goods Ticket Job Cost Sheet, Variance Report
*CMA Exam Tip*: For AIS, think “What triggers next step?” and “Who should NOT do both X and Y?” Segregation + 3-way match are tested heavily.
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