Question 1

Cash equivalents

Accepted Answer

A) include all investments in shares. 
B) include short-term, highly liquid trading investments plus accounts receivable less any bank overdrafts. 
C) include short-term, highly liquid trading investments less any bank overdrafts. 
D) are reported as non-current assets. 
A) include all investments in shares. 
B) include short-term, highly liquid trading investments plus accounts receivable less any bank overdrafts. 
C) include short-term, highly liquid trading investments less any bank overdrafts. 
D) are reported as non-current assets.

Question 2

A system of internal control can only provide reasonable assurance, which is based on the belief that

Accepted Answer

A) the system is infallible. 
B) the system can always detect errors and irregularities. 
C) the costs of establishing control activities should not be greater than the expected benefit. 
D) the human element is not important. 
A) the system is infallible. 
B) the system can always detect errors and irregularities. 
C) the costs of establishing control activities should not be greater than the expected benefit. 
D) the human element is not important.

Question 3

A cheque written by the company for $182 is incorrectly recorded as $218.On the bank reconciliation, the $36 error should be

Accepted Answer

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

Question 4

The use of a bank account makes internal control over cash more difficult.

Accepted Answer

A) True 
 B)False

Question 5

Segregation of duties among employees eliminates the possibility of collusion.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is true in terms of an internal control system?

Accepted Answer

A) A good internal control system will help a company achieve reliable financial reporting, effective and efficient operations, and compliance with laws and regulations. 
B) An internal control system cannot be considered effective until the possibility of human error has been completely eliminated. 
C) Only large companies need to be concerned with a system of internal control. 
D) The extent of internal control activities adopted by a company must not be evaluated in terms of cost-benefit. 
A) A good internal control system will help a company achieve reliable financial reporting, effective and efficient operations, and compliance with laws and regulations. 
B) An internal control system cannot be considered effective until the possibility of human error has been completely eliminated. 
C) Only large companies need to be concerned with a system of internal control. 
D) The extent of internal control activities adopted by a company must not be evaluated in terms of cost-benefit.

Question 8

Outstanding cheques from the prior period which clear the bank in the current period

Accepted Answer

A) should be added to the balance per books. 
B) should be deducted from the balance per books. 
C) should be deducted from the balance per bank. 
D) do not affect the current period's bank reconciliation. 
A) should be added to the balance per books. 
B) should be deducted from the balance per books. 
C) should be deducted from the balance per bank. 
D) do not affect the current period's bank reconciliation.

Question 9

Allowing only the treasurer to sign cheques is an example of which control activity?

Accepted Answer

A) documentation 
B) segregation of duties 
C) physical controls 
D) assignment of responsibility 
A) documentation 
B) segregation of duties 
C) physical controls 
D) assignment of responsibility

Question 10

Deposits in transit require an adjustment to the cash balance per books.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) interest earned. 
B) deposits in transit. 
C) a bank service charge. 
D) a customer's NSF cheque. 
A) interest earned. 
B) deposits in transit. 
C) a bank service charge. 
D) a customer's NSF cheque.

Question 12

Equity Investments (in common shares) are normally classified as cash equivalents.

Accepted Answer

A) True 
 B)False

Question 13

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 14

External auditors

Accepted Answer

A) evaluate the system of internal controls for the companies that employ them. 
B) are employees of the company. 
C) are independent of the company. 
D) plan and perform an internal audit. 
A) evaluate the system of internal controls for the companies that employ them. 
B) are employees of the company. 
C) are independent of the company. 
D) plan and perform an internal audit.

Question 15

The use of prenumbered cheques is an example of

Accepted Answer

A) documentation. 
B) review and reconciliation. 
C) assignment of responsibility. 
D) segregation of duties. 
A) documentation. 
B) review and reconciliation. 
C) assignment of responsibility. 
D) segregation of duties.

Cash equivalents

A system of internal control can only provide reasonable assurance, which is based on the belief that

A cheque written by the company for $182 is incorrectly recorded as $218.On the bank reconciliation, the $36 error should be

The use of a bank account makes internal control over cash more difficult.

Segregation of duties among employees eliminates the possibility of collusion.

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

Which of the following statements is true in terms of an internal control system?

Outstanding cheques from the prior period which clear the bank in the current period

Allowing only the treasurer to sign cheques is an example of which control activity?

Deposits in transit require an adjustment to the cash balance per books.

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

Equity Investments (in common shares) are normally classified as cash equivalents.

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

External auditors

The use of prenumbered cheques is an example of

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

Cash equivalents

A system of internal control can only provide reasonable assurance, which is based on the belief that

A cheque written by the company for $182 is incorrectly recorded as $218.On the bank reconciliation, the $36 error should be

The use of a bank account makes internal control over cash more difficult.

Segregation of duties among employees eliminates the possibility of collusion.

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

Which of the following statements is true in terms of an internal control system?

Outstanding cheques from the prior period which clear the bank in the current period

Allowing only the treasurer to sign cheques is an example of which control activity?

Deposits in transit require an adjustment to the cash balance per books.

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

Equity Investments (in common shares) are normally classified as cash equivalents.

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

External auditors

The use of prenumbered cheques is an example of

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