Question 1

In large companies, independent checks of performance are often assigned to

Accepted Answer

A) shift supervisors. 
B) management. 
C) internal auditors. 
D) external auditors. 
A) shift supervisors. 
B) management. 
C) internal auditors. 
D) external auditors.

Question 2

When two or more people get together for the purpose of circumventing prescribed controls, it is called

Accepted Answer

A) fraud prevention. 
B) collusion. 
C) a division of duties. 
D) bonding of employees. 
A) fraud prevention. 
B) collusion. 
C) a division of duties. 
D) bonding of employees.

Question 3

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A) add $270 to the balance per bank. 
B) add $270 to the balance per books. 
C) deduct $270 from the balance per books. 
D) deduct $270 from the balance per bank. 
A) add $270 to the balance per bank. 
B) add $270 to the balance per books. 
C) deduct $270 from the balance per books. 
D) deduct $270 from the balance per bank.

Question 4

A compensating balance is reported as a non-current asset.

Accepted Answer

A) True 
 B)False

Question 5

The custodian of a company asset should

Accepted Answer

A) not be bonded. 
B) be someone outside the company. 
C) not have access to the accounting records for that asset. 
D) be an accountant. 
A) not be bonded. 
B) be someone outside the company. 
C) not have access to the accounting records for that asset. 
D) be an accountant.

Question 6

The control activity related to not having the same person authorize and pay for goods is known as

Accepted Answer

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

Question 7

A cheque returned by the bank marked "NSF" means

Accepted Answer

A) no service fee. 
B) no signature found. 
C) not satisfactorily filled out. 
D) not sufficient funds. 
A) no service fee. 
B) no signature found. 
C) not satisfactorily filled out. 
D) not sufficient funds.

Question 8

A good system of internal control does not require monitoring.

Accepted Answer

A) True 
 B)False

Question 9

Idle cash should be reported as restricted cash.

Accepted Answer

A) True 
 B)False

Question 10

An accounts payable clerk also has cheque signing authority. Which control procedure is violated?

Accepted Answer

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

Question 11

Which of the following bank reconciliation items would require an adjusting entry on the depositor's books?

Accepted Answer

A) Error by the bank 
B) Outstanding cheques 
C) Bank service charge 
D) Deposit in transit 
A) Error by the bank 
B) Outstanding cheques 
C) Bank service charge 
D) Deposit in transit

Question 12

Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:

Accepted Answer

A) Accounts Receivable Cash 
B) Cash Accounts Receivable 
C) Bank Charges Expense Accounts Receivable 
D) No adjusting entry is necessary. 
A) Accounts Receivable Cash 
B) Cash Accounts Receivable 
C) Bank Charges Expense Accounts Receivable 
D) No adjusting entry is necessary.

Question 13

Which of the following is not true with respect to the reporting of cash?

Accepted Answer

A) Standard setters are considering whether cash equivalents should be reported separately as short-term investments in the future, rather than combined with cash. 
B) Compensating balances are minimum cash balances required by the bank. 
C) Restricted cash can be either a current or a non-current asset, depending on when it is expected to be used. 
D) Cash overdrafts are reported as contra-assets. 
A) Standard setters are considering whether cash equivalents should be reported separately as short-term investments in the future, rather than combined with cash. 
B) Compensating balances are minimum cash balances required by the bank. 
C) Restricted cash can be either a current or a non-current asset, depending on when it is expected to be used. 
D) Cash overdrafts are reported as contra-assets.

Question 14

Control over cash disbursements is improved if all expenditures are paid by cheque or through use of electronic funds transfers.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following is not a primary component of an internal control system?

Accepted Answer

A) Control activities 
B) Delay payment of liabilities 
C) Risk assessment 
D) Control environment 
A) Control activities 
B) Delay payment of liabilities 
C) Risk assessment 
D) Control environment

Question 16

An example of segregation of duties is having a cheque signer record cash disbursements.

Accepted Answer

A) True 
 B)False

Question 17

Royal Machines Limited gathered the following reconciling information in preparing its June bank reconciliation:   The adjusted cash balance per books at June 30 is

Accepted Answer

A) $ 8,775. 
B) $12,000. 
C) $16,500. 
D) $16,725. 
A) $ 8,775. 
B) $12,000. 
C) $16,500. 
D) $16,725.

Question 18

Generally, only debt investments due within three months qualify as cash equivalents.

Accepted Answer

A) True 
 B)False

Question 19

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

Accepted Answer

A) True 
 B)False

Question 20

When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.

Accepted Answer

A) True 
 B)False

In large companies, independent checks of performance are often assigned to

When two or more people get together for the purpose of circumventing prescribed controls, it is called

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to

A compensating balance is reported as a non-current asset.

The custodian of a company asset should

The control activity related to not having the same person authorize and pay for goods is known as

A cheque returned by the bank marked "NSF" means

A good system of internal control does not require monitoring.

Idle cash should be reported as restricted cash.

An accounts payable clerk also has cheque signing authority. Which control procedure is violated?

Which of the following bank reconciliation items would require an adjusting entry on the depositor's books?

Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:

Which of the following is not true with respect to the reporting of cash?

Control over cash disbursements is improved if all expenditures are paid by cheque or through use of electronic funds transfers.

Which one of the following is not a primary component of an internal control system?

An example of segregation of duties is having a cheque signer record cash disbursements.

Royal Machines Limited gathered the following reconciling information in preparing its June bank reconciliation: The adjusted cash balance per books at June 30 is

Generally, only debt investments due within three months qualify as cash equivalents.

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.

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

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Exam 7: Internal Control and Cash

In large companies, independent checks of performance are often assigned to

When two or more people get together for the purpose of circumventing prescribed controls, it is called

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to

A compensating balance is reported as a non-current asset.

The custodian of a company asset should

The control activity related to not having the same person authorize and pay for goods is known as

A cheque returned by the bank marked "NSF" means

A good system of internal control does not require monitoring.

Idle cash should be reported as restricted cash.

An accounts payable clerk also has cheque signing authority. Which control procedure is violated?

Which of the following bank reconciliation items would require an adjusting entry on the depositor's books?

Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:

Which of the following is not true with respect to the reporting of cash?

Control over cash disbursements is improved if all expenditures are paid by cheque or through use of electronic funds transfers.

Which one of the following is not a primary component of an internal control system?

An example of segregation of duties is having a cheque signer record cash disbursements.

Royal Machines Limited gathered the following reconciling information in preparing its June bank reconciliation: The adjusted cash balance per books at June 30 is

Generally, only debt investments due within three months qualify as cash equivalents.

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.

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