Exam 7: Fraud, Internal Control, and Cash

A basic principle of cash management involves the investment of idle cash. a. Explain why this should be done. b. What type of investment is appropriate for the idle cash?

The principle of establishing responsibility does not include

The responsibility for ordering, receiving, and paying for merchandise should be assigned to different individuals.

Maximum benefit from independent internal verification is obtained when

Nilson Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 \ 21,000 Deposits in transit 900 Notes receivable and interest collected by bank 5,100 Bank charge for check printing 120 Outstanding checks 12,000 NSF check 1,020 The adjusted cash balance per books on August 31 is

One of your accounting professors has alerted you about a job opportunity as an internal auditor. a. What is the role of an internal auditor? b. Is this position justified? Why or Why not?

The following reconciling items are applicable to the bank reconciliation for the Gunselman Company. Indicate how each item should be shown on a bank reconciliation. a. Outstanding checks. b. Bank credit memorandum for collecting a note for the depositor. c. Bank debit memorandum for service charge. d. Deposit in transit.

Under an effective system of internal control, errors occur only as a result of fraud or dishonesty.

Which one of the following is not an objective of a system of internal controls?

Samson Instruments is a rapidly growing manufacturer of medical devices. As a result of its growth, the company's management recently modified several of its procedures and practices to improve internal control. Some employees are upset with the changes. They have complained that all these changes just show that the company no longer trusts them. Required: "Internal controls exist because most people can't be trusted." Is this true? Explain.

The following credit sales are budgeted by Garcia Company: January \ 255,000 February 375,000 March 525,000 April 450,000 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of March is

At April 30, Kessler Company has the following bank information: Cash balance per bank \ 11,500 Outstanding checks \ 700 Deposits in transit \ 1,375 Credit memo for interest \ 25 Bank service charge \ 50 What is Kessler's adjusted cash balance on April 30?

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

A traditional definition of internal control specifically includes all of the following features except

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

A NSF check should appear in which section of the bank reconciliation?

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

Electronic funds transfer (EFT) is a disbursement system that transfers cash from one location to another using

All of the following are items that would most likely be paid from a petty cash fund except

All of the following are examples of internal control procedures except