Exam 7: Fraud, Internal Control, and Cash

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

A very small company would have the most difficulty in implementing which of the following internal control activities?

Using the following information, prepare a bank reconciliation for Hammond Company for June 30, 2014.

Bank errors

Which of the following is not an internal control procedure for cash?

The principle of establishing responsibility does not include

Listed below are items that may be useful in preparing the March 2014, bank reconciliation for the Carrinton Machine Works. Using the code letters below, insert in the space before each item the letter where the amount would be located or otherwise treated in the bank reconciliation process.

In the month of May, Lopat Company Inc. wrote checks in the amount of $46,250. In June, checks in the amount of $63,290 were written. In May, $42,340 of these checks were presented to the bank for payment, and $54,415 in June. What is the amount of outstanding checks at the end of June?

Which of the following is not a basic principle of cash management?

The cash receipts section of a cash budget includes all of the following except

Which statement regarding negative cash balances is true?

A cash budget contributes to more effective cash management.

An effective system of internal control centralizes functions in a single capable individual.

Given the following information, determine the adjusted cash balance per books;

Karlin Company gathered the following reconciling information in preparing its April bank reconciliation: The adjusted cash balance per books on April 30 is

A system of internal control cannot be considered good until the possibility of human error has been completely eliminated.

A petty cash fund should be replenished

Shatner Company has budgeted sales revenue as follows: Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month following the sale, and 5% in the second month following the sale. The other 5% is uncollectible. Instructions Prepare a schedule which shows expected cash receipts from sales for the months of April, May, and June.

Jim Gant has worked for Dr. Ken Flood for several years. Jim demonstrates a loyalty that is rare among employees. He hasn't taken a vacation in the last three years. One of Jim's primary duties at the medical office is to open the mail and list the checks received. He also takes cash from patients at the cashier window as patients leave. At times it is so hectic that Jim doesn't bother with giving patients a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office Jim offers to help Lisa post the payments to the patients' accounts receivable. She is always happy to receive his help, because he is a very conscientious worker. Instructions Identify any principles of internal control that may be violated in this medical office situation.

Each of the following is a feature of internal control except