Question 1

Control over cash payments is generally more effective when

Accepted Answer

A)  all bills are paid when due. 
B)  payments are made by the accounts payable subsidiary clerk. 
C)  payments are made by cheque. 
D)  all purchases are made by one individual. 
A)  all bills are paid when due. 
B)  payments are made by the accounts payable subsidiary clerk. 
C)  payments are made by cheque. 
D)  all purchases are made by one individual.

Question 2

In order to assess risk, management will evaluate internal vulnerabilities and how they are connected with the changes in the external environment.

Accepted Answer

A) True 
 B)False

Question 3

The following situations are independent of each other.
1. Jim's Electronic Games is a very relaxed place to work. Unissued blank cheques are left in a box on the floor near the printer.
2. XL Products requires every cheque to be signed by the President and the VP Finance. Because the President travels a lot, he signs several blank cheques in advance of each trip so that his absences will not interfere with the operations of the Accounts Payable department.
3. Dubois Books is short staffed and the accounting department is very busy. As soon as the cheques are printed they are sent to the Executive office to be signed while the invoices that were paid are immediately filed so that the work will not get backlogged.
4. At Nora Sales, two accounting clerks share cheque disbursement duties. They can tell which invoices have been paid by whether they are located in the "unpaid" basket or in the vendor file.
Instructions
For each weakness, describe what could go wrong and make a recommendation to improve internal control.

Accepted Answer

1. Cheque blanks could be stolen, lost o

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Stamping paid invoices "PAID" is an example of which of the following controls?

Accepted Answer

A)  independent checks of performance 
B)  segregation of duties 
C)  documentation procedures 
D)  human resource controls 
A)  independent checks of performance 
B)  segregation of duties 
C)  documentation procedures 
D)  human resource controls

Question 6

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 7

Documentation procedures do NOT include which of the following?

Accepted Answer

A)  prenumbered documents 
B)  source documents sent promptly to the accounting department 
C)  all controls written down and kept updated 
D)  alarms set at the close of the business day 
A)  prenumbered documents 
B)  source documents sent promptly to the accounting department 
C)  all controls written down and kept updated 
D)  alarms set at the close of the business day

Question 8

Documentation procedures over cash payments include all of the following EXCEPT

Accepted Answer

A)  using prenumbered cheques. 
B)  ensuring each cheque has an approved invoice. 
C)  accounting for the numerical sequence of all cheques. 
D)  reconciling bank statements monthly. 
A)  using prenumbered cheques. 
B)  ensuring each cheque has an approved invoice. 
C)  accounting for the numerical sequence of all cheques. 
D)  reconciling bank statements monthly.

Question 9

Notification by the bank that a deposited customer cheque was returned NSF requires that the company make the following adjusting entry:

Accepted Answer

A)  Accounts Receivable 
$\quad $$\quad $Cash 
B)  Cash
$\quad $$\quad $ Accounts Receivable 
C)  Miscellaneous Expense 
$\quad $$\quad $Accounts Receivable 
D)  No adjusting entry is necessary. 
A)  Accounts Receivable 
$\quad $$\quad $Cash 
B)  Cash
$\quad $$\quad $ Accounts Receivable 
C)  Miscellaneous Expense 
$\quad $$\quad $Accounts Receivable 
D)  No adjusting entry is necessary.

Question 10

Restricted Cash is defined as

Accepted Answer

A)  a temporary investment which is due in 90 days. 
B)  cash which is to be used for a special purpose. 
C)  cash which is held in a US bank. 
D)  a cash overdraft. 
A)  a temporary investment which is due in 90 days. 
B)  cash which is to be used for a special purpose. 
C)  cash which is held in a US bank. 
D)  a cash overdraft.

Question 11

In Canada, the responsibility for internal controls is the responsibility of the management.

Accepted Answer

A) True 
 B)False

Question 12

Independent checks of performance should be carried out only by external auditors.

Accepted Answer

A) True 
 B)False

Question 13

Using a bank increases the internal control over cash.

Accepted Answer

A) True 
 B)False

Question 14

Effective and efficient operations can be a result of a strong system of internal control.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Home Appliances allows customers to pay for merchandise with cash, debit cards, bank credit cards, or a Home Appliance Credit Card. The bank charges Home Appliances $1.00 for each debit card sale and a 4% fee for bank credit card sales. On September 25 a customer makes a $1,200 purchase from Home Appliances using her debit card.
Instructions
a. Prepare Home Appliances' journal entry to record this transaction.
b. Assume instead the customer pays for her purchase using her MasterCard. Record the transaction.
c. Assume instead the customer uses her Home Appliances store credit card. Record the transaction.

Accepted Answer

The answer of Home Appliances allows customers to pay for...

Question 17

The following are internal control procedures over cash payments in place at Value Auto Parts.
1. Cheques are signed using an automated cheque signing machine. The machine is stored in a safe that requires two keys to open it. The Controller and Vice President Finance, each have custody of one of the keys.
2. Only original vendor invoices with unique invoice numbers are approved for payment. Faxes and photocopies are not acceptable, and if a vendor sends two invoices with the same number, they are returned and the vendor is asked to re-issue one of them with a different invoice number.
3. The Purchasing Manager is authorized to approve purchase orders, the Receiving Manager approves invoices after matching them to receiving reports, an Accounts Payable Assistant records the purchase invoices, the Accounts Payable Manager prepares cheques and the VP Finance signs them.
4. The computer system produces a log showing how many errors have been made and corrected by each Accounting Assistant in recording vendor invoices.
Instructions
For each internal control, identify which type of control is described, and describe a weakness that the control is designed to prevent or detect.

Accepted Answer

1. Physical & IT controls. Without the d

Question 18

A cheque marked "NSF" means

Accepted Answer

A)  no service fee. 
B)  no signature found. 
C)  not satisfactorily filled out. 
D)  not sufficient funds. 
A)  no service fee. 
B)  no signature found. 
C)  not satisfactorily filled out. 
D)  not sufficient funds.

Question 19

A NSF cheque would always result in a journal entry by the company.
Deleted because the section on outstanding cheques" was deleted from the chapter and from the Glossary.

Accepted Answer

A) True 
 B)False

Question 20

A strong system of internal control will prove that an organization complies with all relevant laws and regulations.

Accepted Answer

A) True 
 B)False

Control over cash payments is generally more effective when

In order to assess risk, management will evaluate internal vulnerabilities and how they are connected with the changes in the external environment.

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

Stamping paid invoices "PAID" is an example of which of the following controls?

Which of the following is NOT a control activity?

Documentation procedures do NOT include which of the following?

Documentation procedures over cash payments include all of the following EXCEPT

Notification by the bank that a deposited customer cheque was returned NSF requires that the company make the following adjusting entry:

Restricted Cash is defined as

In Canada, the responsibility for internal controls is the responsibility of the management.

Independent checks of performance should be carried out only by external auditors.

Using a bank increases the internal control over cash.

Effective and efficient operations can be a result of a strong system of internal control.

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

A cheque marked "NSF" means

A NSF cheque would always result in a journal entry by the company. Deleted because the section on outstanding cheques" was deleted from the chapter and from the Glossary.

A strong system of internal control will prove that an organization complies with all relevant laws and regulations.

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

Control over cash payments is generally more effective when

In order to assess risk, management will evaluate internal vulnerabilities and how they are connected with the changes in the external environment.

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

Stamping paid invoices "PAID" is an example of which of the following controls?

Which of the following is NOT a control activity?

Documentation procedures do NOT include which of the following?

Documentation procedures over cash payments include all of the following EXCEPT

Notification by the bank that a deposited customer cheque was returned NSF requires that the company make the following adjusting entry:

Restricted Cash is defined as

In Canada, the responsibility for internal controls is the responsibility of the management.

Independent checks of performance should be carried out only by external auditors.

Using a bank increases the internal control over cash.

Effective and efficient operations can be a result of a strong system of internal control.

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

A cheque marked "NSF" means

A NSF cheque would always result in a journal entry by the company. Deleted because the section on outstanding cheques" was deleted from the chapter and from the Glossary.

A strong system of internal control will prove that an organization complies with all relevant laws and regulations.

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