Exam 7: Fraud, Internal Control, and Cash

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

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

A credit balance in Cash Over and Short account is shown as

Which of the following is not a limitation of internal control?

Grier Food Store used the following information in recording its bank reconciliation for the month of April. (1) Checks written in April but still outstanding $6,300. (2) Checks written in March but still outstanding $2,800. (3) Deposits of April 30 not yet recorded by bank $4,900. (4) NSF check of customer returned by bank $500. (5) Check No. 210 for $594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for $549. (6) Bank service charge for April was $40. (7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for $824 when Check No. 318 was correctly prepared for $284. The check cleared the bank in April. (8) The bank collected a note receivable for the company of $6,000 plus $240 interest revenue. Instructions Prepare a bank reconciliation at April 30.

Expected direct materials purchases in Wade Company are $525,000 in the first quarter and $675,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are:

A $200 petty cash fund has cash of $26 and receipts of $170. The journal entry to replenish the account would include

The custodian of a company asset should

Supervisors counting cash receipts daily is an example of

An exception to disbursements being made by check is acceptable when cash is paid

GAAP's, accounting and internal control procedures related to cash and the definition of cash equivalents, as compared to IFRS are:

A basic principle of cash management is to increase the speed of paying liabilities.

The following credit sales are budgeted by Garcia Company: 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

Allowing only the treasurer to sign checks is an example of

(Ethics) 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 reconciliation of the cash register tape with the cash in the register is an example of

Sam's Grocery Store has the following policy. 'Only one cashier can have access to a cash drawer.' Which internal control principle supports this policy?

How do these principles apply to cash disbursements: (a) Physical controls? (b) Human resource controls?

The preparation of a bank reconciliation is an important cash control procedure. If a company deposits cash receipts daily and makes all cash disbursements by check, explain why the cash balance per books might not agree with the cash balance shown on the bank statement. Identify specific examples that may cause differences between the cash balance per books and the cash balance per bank.

Important objectives of a system of internal controls are to safeguard assets and to enhance the accuracy and reliability of the accounting records. Briefly discuss how (1) cost-benefit considerations, (2) the human element, and (3) the size of the business affect the implementation of a system of internal controls.