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Difficulty: MediumElectronic Business and Data Interchange in Accounting

A retail enterprise integrates its accounting system with suppliers via Electronic Data Interchange (EDI) and processes payments through Electronic Funds Transfer (EFT). Which internal control procedure best ensures that duplicate disbursements are prevented when supplier invoices are electronically received?

  1. Automated three-way matching of the electronic purchase order, receiving report, and vendor invoice prior to EFT authorizationAnswer
  2. B
    Manual inspection of printed paper delivery receipts by the head accountant prior to monthly payment runs
  3. C
    Accumulating all incoming electronic invoices for periodic batch processing at the end of each accounting quarter
  4. D
    Restricting system access through encrypted user passwords at data entry terminals

Answer

Automated three-way matching of the electronic purchase order, receiving report, and vendor invoice prior to EFT authorization
Automated three-way matching validates transaction details across the electronic purchase order, receiving report, and invoice before triggering an Electronic Funds Transfer (EFT). This ensures that payment is made only for goods actually ordered and received, preventing duplicate or fraudulent payouts.

Step-by-Step Solution

1
Identify the primary operational risk in electronic data interchange (EDI) invoice processing.
The primary risk is processing unverified, inaccurate, or duplicate vendor invoices automatically.
Because transactions are transmitted digitally without physical paper documents, automated control validation is essential.
2
Evaluate the effective computerized internal control mechanism for accounts payable.
Automated three-way matching cross-references the digital Purchase Order, receiving report (Goods Received Note), and electronic invoice.
If any document is missing or already flagged as paid, the system automatically blocks duplicate EFT disbursement.

Key Concept

Internal Controls and Automated Matching in Electronic Data Interchange (EDI)
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Topics

Electronic Business and Data Interchange in Accounting

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