Question 1

For efficiency of operations and better control over cash, a company should maintain only one bank account.

Accepted Answer

A) True 
 B)False

Question 2

Fraud is most likely committed by people inside an organization.

Accepted Answer

A) True 
 B)False

Question 3

Staledated cheques would NOT be reported as cash on the Balance Sheet.

Accepted Answer

A) True 
 B)False

Question 4

The following procedures are used by Kurtz Renovations in handling cash payments. The individuals involved in the cheque preparation and payment process are Howie, the Accounts Payable clerk, who reports to the Controller, and Jane, the Construction Manager.
1. When purchase invoices are received, Jane approves them for payment. After they are approved, Howie records the purchase invoices in the Accounts Payable subledger and then files them in an "unpaid invoices" file. Once or twice a week, Howie scans through the file and decides which invoices should be paid.
2. Howie prepares the cheques manually. He enters cheque numbers on the cheques which are not pre-numbered.
3. The unsigned cheques are put into Jane's In Box to be signed.
4. Jane does not feel she needs to see the invoices again when she signs the cheques so only the cheques are given to her.
5. Jane is often out of the office on construction projects, but she tries to make sure that she signs the cheques within two or three days.
6. After she has signed the cheques, Jane returns them to Howie for mailing. After Howie has mailed the cheques, he files the paid invoices in the vendor invoice files.
Instructions
For each procedure, describe what could go wrong as a result of the weakness described, and recommend an internal control to correct the weakness.

Accepted Answer

1. The same person who records the chequ

Question 5

Which of the following transactions are NOT covered by the term "Electronic Funds Transfer"?

Accepted Answer

A)  prepaid smart cards 
B)  debit and credit card transactions 
C)  mail-in cheques 
D)  electronic bill payments using on-line banking 
A)  prepaid smart cards 
B)  debit and credit card transactions 
C)  mail-in cheques 
D)  electronic bill payments using on-line banking

Question 6

In terms of segregation of duties, which one of the following is NOT related to the other three?

Accepted Answer

A)  ordering the merchandise 
B)  making a sale 
C)  shipping the goods 
D)  billing the customer 
A)  ordering the merchandise 
B)  making a sale 
C)  shipping the goods 
D)  billing the customer

Question 7

Which one of the following would NOT cause a bank to debit a depositor's account?

Accepted Answer

A)  bank service charge 
B)  an electronic funds transfer from a customer's account 
C)  wiring of funds to other locations 
D)  returned cheques marked NSF 
A)  bank service charge 
B)  an electronic funds transfer from a customer's account 
C)  wiring of funds to other locations 
D)  returned cheques marked NSF

Question 8

Electronic funds transfer

Accepted Answer

A)  occurs when a company has a computerized cash register. 
B)  occurs when a company downloads bank details to a company computer. 
C)  occurs when a certified cheque is requested. 
D)  is a system that electronically transfers funds between parties without the use of paper. 
A)  occurs when a company has a computerized cash register. 
B)  occurs when a company downloads bank details to a company computer. 
C)  occurs when a certified cheque is requested. 
D)  is a system that electronically transfers funds between parties without the use of paper.

Question 9

The following is information about Pelly Car Repair's cash and related accounts at December 31, 2014:
1. Postdated cheques from customers total $5,500. The cheques are dated January 31, 2015.
2. The company has a savings account with a balance of $5,250 after all adjustments are recorded.
3. The company has guaranteed investment certificates totalling $10,000 due in 30 days.
4. The company maintains a cash float of $1,000 for use in the cash registers and which is stored in a locked safe overnight. On December 31, the sales manager borrowed $100 from the cash float, leaving an "IOU" note in the safe.
5. The chequing account is overdrawn, showing a negative balance of $12,400 after all adjustments.
Instructions
a. Calculate what amount of cash and cash equivalents will be reported on Pelly's December 31, 2014 balance sheet.
b. For each of the items listed that is not included in cash on hand, indicate how the amount will be reported in Pelly's December 31, 2014 financial statements.

Accepted Answer

a. Cash and cash equivalents include:
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Question 10

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

Accepted Answer

A) True 
 B)False

Question 11

Proper segregation of accounting duties eliminates the need for internal control.

Accepted Answer

A) True 
 B)False

Question 12

Purchase orders are required for all cheques to be issued.

Accepted Answer

A) True 
 B)False

Question 13

Control activities are the actions that must be taken to respond to risks that threaten reliable financial reporting.

Accepted Answer

A) True 
 B)False

Question 14

When customers make purchases with a bank credit card, the retailer

Accepted Answer

A)  is responsible for maintaining customer accounts. 
B)  is not involved in the collection process. 
C)  absorbs any losses from uncollectible accounts. 
D)  receives cash equal to the full price of the merchandise sold from the credit card company. 
A)  is responsible for maintaining customer accounts. 
B)  is not involved in the collection process. 
C)  absorbs any losses from uncollectible accounts. 
D)  receives cash equal to the full price of the merchandise sold from the credit card company.

Question 15

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 16

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 17

Electronic Funds Transfers are used to

Accepted Answer

A)  reduce the risk of lost or stolen cheques. 
B)  reduce the cost of making payments by cheque. 
C)  used to make payroll payments to employees. 
D)  all of the above. 
A)  reduce the risk of lost or stolen cheques. 
B)  reduce the cost of making payments by cheque. 
C)  used to make payroll payments to employees. 
D)  all of the above.

Question 18

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 19

The fees for credit cards are higher than the fees for debit cards.

Accepted Answer

A) True 
 B)False

Question 20

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.

For efficiency of operations and better control over cash, a company should maintain only one bank account.

Fraud is most likely committed by people inside an organization.

Staledated cheques would NOT be reported as cash on the Balance Sheet.

Which of the following transactions are NOT covered by the term "Electronic Funds Transfer"?

In terms of segregation of duties, which one of the following is NOT related to the other three?

Which one of the following would NOT cause a bank to debit a depositor's account?

Electronic funds transfer

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

Proper segregation of accounting duties eliminates the need for internal control.

Purchase orders are required for all cheques to be issued.

Control activities are the actions that must be taken to respond to risks that threaten reliable financial reporting.

When customers make purchases with a bank credit card, the retailer

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

Which of the following has the greatest internal control?

Electronic Funds Transfers are used to

A system of internal control

The fees for credit cards are higher than the fees for debit cards.

A debit memorandum would NOT be issued by the bank for

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 7: Internal Control and Cash

For efficiency of operations and better control over cash, a company should maintain only one bank account.

Fraud is most likely committed by people inside an organization.

Staledated cheques would NOT be reported as cash on the Balance Sheet.

Which of the following transactions are NOT covered by the term "Electronic Funds Transfer"?

In terms of segregation of duties, which one of the following is NOT related to the other three?

Which one of the following would NOT cause a bank to debit a depositor's account?

Electronic funds transfer

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

Proper segregation of accounting duties eliminates the need for internal control.

Purchase orders are required for all cheques to be issued.

Control activities are the actions that must be taken to respond to risks that threaten reliable financial reporting.

When customers make purchases with a bank credit card, the retailer

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

Which of the following has the greatest internal control?

Electronic Funds Transfers are used to

A system of internal control

The fees for credit cards are higher than the fees for debit cards.

A debit memorandum would NOT be issued by the bank for

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters