Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

Maximum benefit from review and reconciliation is obtained when

Accepted Answer

A) it is made on a pre-announced basis. 
B) it is done by the employee possessing custody of the asset. 
C) discrepancies are reported to management. 
D) it is done at the time of the external audit. 
A) it is made on a pre-announced basis. 
B) it is done by the employee possessing custody of the asset. 
C) discrepancies are reported to management. 
D) it is done at the time of the external audit. C

Question 3

Internal controls may be limited by each of the following except

Accepted Answer

A) the size of the business. 
B) the human element. 
C) internal audits. 
D) collusion. 
A) the size of the business. 
B) the human element. 
C) internal audits. 
D) collusion. C

Question 4

A cheque in the amount of $425 was returned by the bank marked "NSF".A bank service fee of $20 was charged for processing the returned cheque.Upon notification of the NSF, the company who initially received the customer's cheque will most likely

Accepted Answer

A) reverse the customer's payment on their books to re-establish the accounts receivable for $425. 
B) make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding. 
C) reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit bank charges expense for the bank service fee of $20. 
D) reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit the accounts receivable for the bank service fee of $20. 
A) reverse the customer's payment on their books to re-establish the accounts receivable for $425. 
B) make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding. 
C) reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit bank charges expense for the bank service fee of $20. 
D) reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit the accounts receivable for the bank service fee of $20.

Question 5

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

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 6

If a cheque correctly written and paid by the bank for $483 is incorrectly recorded on the company's books for $384, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A) add $99 to the balance per bank. 
B) add $99 to the balance per books. 
C) deduct $99 from the balance per books. 
D) deduct $99 from the balance per bank. 
A) add $99 to the balance per bank. 
B) add $99 to the balance per books. 
C) deduct $99 from the balance per books. 
D) deduct $99 from the balance per bank.

Question 7

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

Accepted Answer

A) cheque for $86 recorded as $68 by the depositor 
B) deposit of $300 recorded by the bank as $30 
C) a paid cheque for $600 recorded by the bank as $60 
D) cheque for $28 recorded as $82 by the depositor 
A) cheque for $86 recorded as $68 by the depositor 
B) deposit of $300 recorded by the bank as $30 
C) a paid cheque for $600 recorded by the bank as $60 
D) cheque for $28 recorded as $82 by the depositor

Question 8

Debt investments due within three months are normally classified as cash equivalents.

Accepted Answer

A) True 
 B)False

Question 9

Two employees at a retail store work the same cash register.You evaluate this situation as

Accepted Answer

A) a violation of assignment of responsibility. 
B) a violation of segregation of duties. 
C) supporting assignment of responsibility. 
D) supporting review and reconciliation. 
A) a violation of assignment of responsibility. 
B) a violation of segregation of duties. 
C) supporting assignment of responsibility. 
D) supporting review and reconciliation.

Question 10

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 11

NSF cheques received are accounted for by adding them to the cash balance per books.

Accepted Answer

A) True 
 B)False

Question 12

Sunny Sky Corporation gathered the following reconciling information in preparing its August bank reconciliation:   The reconciled cash balance per bank at August 31 is

Accepted Answer

A) $ 17,785. 
B) $ 14,075. 
C) $ 9,575. 
D) $18,575. 
A) $ 17,785. 
B) $ 14,075. 
C) $ 9,575. 
D) $18,575.

Question 13

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) assignment of responsibilities. 
A) fraud prevention. 
B) collusion. 
C) a division of duties. 
D) assignment of responsibilities.

Question 14

Which of the following is not a control activity over cash?

Accepted Answer

A) Only designated personnel are authorized to handle cash. 
B) The same individual receives the cash and pays the bills. 
C) Surprise audits of cash on hand should be made occasionally. 
D) Access to cash is limited. 
A) Only designated personnel are authorized to handle cash. 
B) The same individual receives the cash and pays the bills. 
C) Surprise audits of cash on hand should be made occasionally. 
D) Access to cash is limited.

Question 15

The use of electronic funds transfers

Accepted Answer

A) normally results in better internal controls. 
B) does not require segregation of duties. 
C) eliminates opportunities for fraud. 
D) does not require proper authorization. 
A) normally results in better internal controls. 
B) does not require segregation of duties. 
C) eliminates opportunities for fraud. 
D) does not require proper authorization.

Question 16

Stardust Corporation gathered the following reconciling information in preparing its October bank reconciliation:   The reconciled cash balance per books at October 31 is

Accepted Answer

A) $7,125. 
B) $6,900. 
C) $5,200. 
D) $5,650. 
A) $7,125. 
B) $6,900. 
C) $5,200. 
D) $5,650.

Question 17

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 18

External auditors are usually employees of the company.

Accepted Answer

A) True 
 B)False

Question 19

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.

Question 20

An authorized signing officer should sign a cheque only after reviewing the appropriate supporting documentation.

Accepted Answer

A) True 
 B)False

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

Maximum benefit from review and reconciliation is obtained when

Internal controls may be limited by each of the following except

A cheque in the amount of $425 was returned by the bank marked "NSF".A bank service fee of $20 was charged for processing the returned cheque.Upon notification of the NSF, the company who initially received the customer's cheque will most likely

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

If a cheque correctly written and paid by the bank for $483 is incorrectly recorded on the company's books for $384, the appropriate treatment on the bank reconciliation would be to

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

Debt investments due within three months are normally classified as cash equivalents.

Two employees at a retail store work the same cash register.You evaluate this situation as

In preparing a bank reconciliation, outstanding cheques are

NSF cheques received are accounted for by adding them to the cash balance per books.

Sunny Sky Corporation gathered the following reconciling information in preparing its August bank reconciliation: The reconciled cash balance per bank at August 31 is

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

Which of the following is not a control activity over cash?

The use of electronic funds transfers

Stardust Corporation gathered the following reconciling information in preparing its October bank reconciliation: The reconciled cash balance per books at October 31 is

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

External auditors are usually employees of the company.

Internal auditors

An authorized signing officer should sign a cheque only after reviewing the appropriate supporting documentation.

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

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

Maximum benefit from review and reconciliation is obtained when

Internal controls may be limited by each of the following except

A cheque in the amount of $425 was returned by the bank marked "NSF".A bank service fee of $20 was charged for processing the returned cheque.Upon notification of the NSF, the company who initially received the customer's cheque will most likely

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

If a cheque correctly written and paid by the bank for $483 is incorrectly recorded on the company's books for $384, the appropriate treatment on the bank reconciliation would be to

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

Debt investments due within three months are normally classified as cash equivalents.

Two employees at a retail store work the same cash register.You evaluate this situation as

In preparing a bank reconciliation, outstanding cheques are

NSF cheques received are accounted for by adding them to the cash balance per books.

Sunny Sky Corporation gathered the following reconciling information in preparing its August bank reconciliation: The reconciled cash balance per bank at August 31 is

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

Which of the following is not a control activity over cash?

The use of electronic funds transfers

Stardust Corporation gathered the following reconciling information in preparing its October bank reconciliation: The reconciled cash balance per books at October 31 is

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

External auditors are usually employees of the company.

Internal auditors

An authorized signing officer should sign a cheque only after reviewing the appropriate supporting documentation.

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