Question 1

An employee who makes a sale, ships the goods and bills the customer violates which control activity?

Accepted Answer

A) Authorization of transactions and activities 
B) Documentation 
C) Segregation of duties 
D) Human resource controls 
A) Authorization of transactions and activities 
B) Documentation 
C) Segregation of duties 
D) Human resource controls C

Question 2

The use of prenumbered cheques is an example of

Accepted Answer

A) documentation. 
B) independent checks of performance. 
C) authorization of transactions and activities. 
D) segregation of duties. 
A) documentation. 
B) independent checks of performance. 
C) authorization of transactions and activities. 
D) segregation of duties. A

Question 3

Internal auditors

Accepted Answer

A) are hired by independent accounting firms to audit companies. 
B) are employees of the government who evaluate the internal controls of companies filing tax returns. 
C) evaluate the system of internal controls for the companies that employ them. 
D) cannot evaluate the system of internal controls of the companies that employ them because they are not independent. 
A) are hired by independent accounting firms to audit companies. 
B) are employees of the government who evaluate the internal controls of companies filing tax returns. 
C) evaluate the system of internal controls for the companies that employ them. 
D) cannot evaluate the system of internal controls of the companies that employ them because they are not independent. C

Question 4

Joe is warehouse custodian and also maintains the accounting records of the inventory held at the warehouse. Which control procedure is violated?

Accepted Answer

A) documentation 
B) independent checks of performance 
C) segregation of duties 
D) authorization of transactions and activities 
A) documentation 
B) independent checks of performance 
C) segregation of duties 
D) authorization of transactions and activities

Question 5

Background checks of prospective employees are not necessary when a company has an effective system of internal control.

Accepted Answer

A) True 
 B)False

Question 6

Deposits in transit

Accepted Answer

A) have been recorded on the depositor's books but not yet by the bank. 
B) have been recorded by the bank but not yet by the depositor. 
C) when the month's bank statement is received in order have not been recorded by either the bank or the depositor. 
D) are customers' cheques that are in the mail but have not yet been received by the depositor. 
A) have been recorded on the depositor's books but not yet by the bank. 
B) have been recorded by the bank but not yet by the depositor. 
C) when the month's bank statement is received in order have not been recorded by either the bank or the depositor. 
D) are customers' cheques that are in the mail but have not yet been received by the depositor.

Question 7

In preparing a bank reconciliation, outstanding cheques are

Accepted Answer

A) added to the balance per bank. 
B) deducted from the balance per books. 
C) added to the balance per books. 
D) deducted from the balance per bank. 
A) added to the balance per bank. 
B) deducted from the balance per books. 
C) added to the balance per books. 
D) deducted from the balance per bank.

Question 8

Only large companies need to be concerned with a system of internal control.

Accepted Answer

A) True 
 B)False

Question 9

Internal controls may be limited by each of the following except

Accepted Answer

A) the size of the business. 
B) the human element. 
C) bonding of employees. 
D) collusion. 
A) the size of the business. 
B) the human element. 
C) bonding of employees. 
D) collusion.

Question 10

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

Accepted Answer

A) True 
 B)False

Question 11

All documents should be prenumbered.

Accepted Answer

A) True 
 B)False

Question 12

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

Accepted Answer

A) True 
 B)False

Question 13

The use of electronic funds transfers normally results in better control over cash.

Accepted Answer

A) True 
 B)False

Question 14

Debit card and bank credit card transactions are considered cash.

Accepted Answer

A) True 
 B)False

Question 15

On a bank reconciliation, which of the following would be added to the balance per books?

Accepted Answer

A) Outstanding cheques 
B) Deposits in transit 
C) Electronic payment by a customer on account 
D) Bank service charges 
A) Outstanding cheques 
B) Deposits in transit 
C) Electronic payment by a customer on account 
D) Bank service charges

Question 16

From an internal control standpoint, what type of controls are thorough background checks and bonding of employees?

Accepted Answer

A) Physical controls 
B) Human resource controls 
C) Independent checks of performance 
D) Documentation 
A) Physical controls 
B) Human resource controls 
C) Independent checks of performance 
D) Documentation

Question 17

Risk assessment is one component of a good system of internal control.

Accepted Answer

A) True 
 B)False

Question 18

Control over cash disbursements is generally more effective when

Accepted Answer

A) all bills are paid in cash. 
B) disbursements are made by the accounts payable subsidiary clerk. 
C) payments are made by cheque or electronic funds transfer. 
D) all purchases are made on credit. 
A) all bills are paid in cash. 
B) disbursements are made by the accounts payable subsidiary clerk. 
C) payments are made by cheque or electronic funds transfer. 
D) all purchases are made on credit.

Question 19

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Accepted Answer

A) Pre-signed blank cheques 
B) Different individuals approve and make payments 
C) Blank cheques are stored with limited access 
D) The bank statement is reconciled monthly 
A) Pre-signed blank cheques 
B) Different individuals approve and make payments 
C) Blank cheques are stored with limited access 
D) The bank statement is reconciled monthly

Question 20

Cash equivalents are

Accepted Answer

A) generally short term investments in shares. 
B) short-term, highly liquid investments that are subject to significant risk of changes in value. 
C) short-term, highly liquid investments that are subject to insignificant risk of changes in value. 
D) reported as non-current assets. 
A) generally short term investments in shares. 
B) short-term, highly liquid investments that are subject to significant risk of changes in value. 
C) short-term, highly liquid investments that are subject to insignificant risk of changes in value. 
D) reported as non-current assets.

An employee who makes a sale, ships the goods and bills the customer violates which control activity?

The use of prenumbered cheques is an example of

Internal auditors

Joe is warehouse custodian and also maintains the accounting records of the inventory held at the warehouse. Which control procedure is violated?

Background checks of prospective employees are not necessary when a company has an effective system of internal control.

Deposits in transit

In preparing a bank reconciliation, outstanding cheques are

Only large companies need to be concerned with a system of internal control.

Internal controls may be limited by each of the following except

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

All documents should be prenumbered.

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

The use of electronic funds transfers normally results in better control over cash.

Debit card and bank credit card transactions are considered cash.

On a bank reconciliation, which of the following would be added to the balance per books?

From an internal control standpoint, what type of controls are thorough background checks and bonding of employees?

Risk assessment is one component of a good system of internal control.

Control over cash disbursements is generally more effective when

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Cash equivalents are

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters

Exam 7: Internal Control and Cash

An employee who makes a sale, ships the goods and bills the customer violates which control activity?

The use of prenumbered cheques is an example of

Internal auditors

Joe is warehouse custodian and also maintains the accounting records of the inventory held at the warehouse. Which control procedure is violated?

Background checks of prospective employees are not necessary when a company has an effective system of internal control.

Deposits in transit

In preparing a bank reconciliation, outstanding cheques are

Only large companies need to be concerned with a system of internal control.

Internal controls may be limited by each of the following except

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

All documents should be prenumbered.

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

The use of electronic funds transfers normally results in better control over cash.

Debit card and bank credit card transactions are considered cash.

On a bank reconciliation, which of the following would be added to the balance per books?

From an internal control standpoint, what type of controls are thorough background checks and bonding of employees?

Risk assessment is one component of a good system of internal control.

Control over cash disbursements is generally more effective when

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Cash equivalents are

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters