Question 1

Sales using a nonbank credit card are considered cash sales by the retailer.

Accepted Answer

A) True 
 B)False

Question 2

Independent internal and/or external checks of performance would NOT include the following:

Accepted Answer

A)  the checking should be done periodically or by surprise. 
B)  the checking should be done by someone who is independent of the employee who is responsible for the information. 
C)  locked warehouses are used for storage of inventory. 
D)  discrepancies should be reported to a management level that can do whatever is necessary to correct the situation. 
A)  the checking should be done periodically or by surprise. 
B)  the checking should be done by someone who is independent of the employee who is responsible for the information. 
C)  locked warehouses are used for storage of inventory. 
D)  discrepancies should be reported to a management level that can do whatever is necessary to correct the situation.

Question 3

A debit memorandum would NOT be issued by the bank for

Accepted Answer

A)  certifying cheques. 
B)  the issuance of traveller's cheques. 
C)  transferring funds to other locations. 
D)  an electronic funds transfer received from a customer's account. 
A)  certifying cheques. 
B)  the issuance of traveller's cheques. 
C)  transferring funds to other locations. 
D)  an electronic funds transfer received from a customer's account.

Question 4

The internal audit function is only effective when

Accepted Answer

A)  control tasks are properly performed. 
B)  the results of an internal audit are reported to senior management and/or the company's owners. 
C)  independent checks of performance are carried out on a regular basis. 
D)  reports are filed with the CICA. 
A)  control tasks are properly performed. 
B)  the results of an internal audit are reported to senior management and/or the company's owners. 
C)  independent checks of performance are carried out on a regular basis. 
D)  reports are filed with the CICA.

Question 5

An adjusting entry is NOT required for

Accepted Answer

A)  outstanding cheques. 
B)  EFT collections. 
C)  NSF cheques. 
D)  bank service charges. 
A)  outstanding cheques. 
B)  EFT collections. 
C)  NSF cheques. 
D)  bank service charges.

Question 6

Which of the following has the greatest internal control?

Accepted Answer

A)  payments made by credit card 
B)  payments made by cheque 
C)  payments made by electronic funds transfer 
D)  payments made by cash 
A)  payments made by credit card 
B)  payments made by cheque 
C)  payments made by electronic funds transfer 
D)  payments made by cash

Question 7

The most important element of the fraud triangle is rationalization.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is NOT a control activity?

Accepted Answer

A)  financial reporting 
B)  independent checks of performance 
C)  documentation procedures 
D)  physical and IT controls 
A)  financial reporting 
B)  independent checks of performance 
C)  documentation procedures 
D)  physical and IT controls

Question 9

Bank service charges are normally debited to Bank Charges Expense.

Accepted Answer

A) True 
 B)False

Question 10

Internal auditors evaluate the effectiveness of the organization's external controls.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would NOT be reported on the balance sheet as a cash equivalent?

Accepted Answer

A)  money market fund 
B)  sixty-day guaranteed investment certificate 
C)  restricted funds for plant expansion in two years 
D)  three-month treasury bill 
A)  money market fund 
B)  sixty-day guaranteed investment certificate 
C)  restricted funds for plant expansion in two years 
D)  three-month treasury bill

Question 12

A system of internal control

Accepted Answer

A)  can never fail. 
B)  can be ineffective if employees collude. 
C)  will have costs exceeding benefits. 
D)  is based on the concept of absolute assurance. 
A)  can never fail. 
B)  can be ineffective if employees collude. 
C)  will have costs exceeding benefits. 
D)  is based on the concept of absolute assurance.

Question 13

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 14

Television monitors are an example of a physical safeguard control.

Accepted Answer

A) True 
 B)False

Question 15

From an internal control standpoint, the asset most susceptible to improper diversion and use is

Accepted Answer

A)  inventory. 
B)  cash. 
C)  short-term investments. 
D)  accounts receivable. 
A)  inventory. 
B)  cash. 
C)  short-term investments. 
D)  accounts receivable.

Question 16

The use of automatic pre-authorized monthly bill payments

Accepted Answer

A)  has declined significantly in Canada over the past several years. 
B)  reduces the effectiveness of an organization's internal control system. 
C)  is a form of electronic funds transfer. 
D)  substantially increases the amount of paperwork required by the accounting department. 
A)  has declined significantly in Canada over the past several years. 
B)  reduces the effectiveness of an organization's internal control system. 
C)  is a form of electronic funds transfer. 
D)  substantially increases the amount of paperwork required by the accounting department.

Question 17

Internal control is the responsibility of the external auditor of the organization.

Accepted Answer

A) True 
 B)False

Question 18

Choose the statement which is most INCORRECT. Cheques received through the mail should

Accepted Answer

A)  immediately be endorsed "For Deposit Only." 
B)  be verified against the customer's bank balance. A clerk should call the customer's bank to ensure that the customer has sufficient funds to cover the cheque. 
C)  be deposited at the bank as soon as possible. 
D)  be "rung up" on a cash register immediately. 
A)  immediately be endorsed "For Deposit Only." 
B)  be verified against the customer's bank balance. A clerk should call the customer's bank to ensure that the customer has sufficient funds to cover the cheque. 
C)  be deposited at the bank as soon as possible. 
D)  be "rung up" on a cash register immediately.

Question 19

External auditors may be employees of the company.

Accepted Answer

A) True 
 B)False

Question 20

A NSF cheque would always result in a journal entry by the company.

Accepted Answer

A) True 
 B)False

Sales using a nonbank credit card are considered cash sales by the retailer.

Independent internal and/or external checks of performance would NOT include the following:

A debit memorandum would NOT be issued by the bank for

The internal audit function is only effective when

An adjusting entry is NOT required for

Which of the following has the greatest internal control?

The most important element of the fraud triangle is rationalization.

Which of the following is NOT a control activity?

Bank service charges are normally debited to Bank Charges Expense.

Internal auditors evaluate the effectiveness of the organization's external controls.

Which of the following would NOT be reported on the balance sheet as a cash equivalent?

A system of internal control

In preparing a bank reconciliation, outstanding cheques are

Television monitors are an example of a physical safeguard control.

From an internal control standpoint, the asset most susceptible to improper diversion and use is

The use of automatic pre-authorized monthly bill payments

Internal control is the responsibility of the external auditor of the organization.

Choose the statement which is most INCORRECT. Cheques received through the mail should

External auditors may be employees of the company.

A NSF cheque would always result in a journal entry by the company.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Accounting for Receivables

Long-Lived Assets

Current Liabilities and Payroll

Filters

Exam 7: Internal Control and Cash

Sales using a nonbank credit card are considered cash sales by the retailer.

Independent internal and/or external checks of performance would NOT include the following:

A debit memorandum would NOT be issued by the bank for

The internal audit function is only effective when

An adjusting entry is NOT required for

Which of the following has the greatest internal control?

The most important element of the fraud triangle is rationalization.

Which of the following is NOT a control activity?

Bank service charges are normally debited to Bank Charges Expense.

Internal auditors evaluate the effectiveness of the organization's external controls.

Which of the following would NOT be reported on the balance sheet as a cash equivalent?

A system of internal control

In preparing a bank reconciliation, outstanding cheques are

Television monitors are an example of a physical safeguard control.

From an internal control standpoint, the asset most susceptible to improper diversion and use is

The use of automatic pre-authorized monthly bill payments

Internal control is the responsibility of the external auditor of the organization.

Choose the statement which is most INCORRECT. Cheques received through the mail should

External auditors may be employees of the company.

A NSF cheque would always result in a journal entry by the company.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Accounting for Receivables

Long-Lived Assets

Current Liabilities and Payroll

Filters