Question 1

Which of the following signatures (or initials) should appear on a completed petty cash ticket?

Accepted Answer

A)  The signatures of the petty cash fund custodian and the recipient of cash 
B)  Only the signature of the petty cash fund custodian 
C)  Only the signature of the recipient of cash 
D)  The signatures of the petty cash fund custodian and the controller 
A)  The signatures of the petty cash fund custodian and the recipient of cash 
B)  Only the signature of the petty cash fund custodian 
C)  Only the signature of the recipient of cash 
D)  The signatures of the petty cash fund custodian and the controller

Question 2

Which of the following motivates most companies to use a lock-box system?

Accepted Answer

A)  The lock-box system puts a company's cash to work immediately. 
B)  Internal control is tight because company personnel never touch incoming cash. 
C)  Both A and B are true. 
D)  Neither A nor B are true. 
A)  The lock-box system puts a company's cash to work immediately. 
B)  Internal control is tight because company personnel never touch incoming cash. 
C)  Both A and B are true. 
D)  Neither A nor B are true.

Question 3

Which of the following describes the internal control component "information system"?

Accepted Answer

A)  Internal auditors monitor company controls to safeguard assets and external auditors monitor the controls to ensure that the accounting records are accurate. 
B)  Control procedures are designed to ensure that the business's goals are achieved. 
C)  The information system is critical because the owner of a business needs accurate information to keep track of assets and measure profits and losses. 
D)  The information system is the "tone at the top" of the business. 
A)  Internal auditors monitor company controls to safeguard assets and external auditors monitor the controls to ensure that the accounting records are accurate. 
B)  Control procedures are designed to ensure that the business's goals are achieved. 
C)  The information system is critical because the owner of a business needs accurate information to keep track of assets and measure profits and losses. 
D)  The information system is the "tone at the top" of the business.

Question 4

Which of the following is true of an Electronic Data Interchange payment?

Accepted Answer

A)  The payment bypasses people and documents altogether. 
B)  The payment requires a small amount of paperwork. 
C)  The payment requires a small amount of human involvement. 
D)  No internal controls are necessary. 
A)  The payment bypasses people and documents altogether. 
B)  The payment requires a small amount of paperwork. 
C)  The payment requires a small amount of human involvement. 
D)  No internal controls are necessary.

Question 5

Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.

Accepted Answer

A) True 
 B)False

Question 6

A security guard at a Wal-Mart costs about $28,000 a year. On average, each guard prevents about $50,000 of theft. Which of the following internal control concepts does this illustrate?

Accepted Answer

A)  Proper authorization 
B)  Competent, reliable, and ethical personnel 
C)  Separation of duties 
D)  Cost/benefit relationship 
A)  Proper authorization 
B)  Competent, reliable, and ethical personnel 
C)  Separation of duties 
D)  Cost/benefit relationship

Question 7

At the West Texas Clothing Store, the same employee that sold merchandise rings up returned merchandise and refunds the cash. Which internal control procedure is being violated by West Texas Clothing Store?

Accepted Answer

A)  The "tone at the top" requires that the owner and managers set a good example. 
B)  A company must identify its risks. 
C)  External auditors will monitor internal controls. 
D)  All transactions must be properly authorized. 
A)  The "tone at the top" requires that the owner and managers set a good example. 
B)  A company must identify its risks. 
C)  External auditors will monitor internal controls. 
D)  All transactions must be properly authorized.

Question 8

of the following is a step in the daily control over cash receipts over the counter?

Accepted Answer

A)  The cash drawer opens when the clerk enters a transaction. 
B)  At the end of the day, a manager proves the cash by comparing the cash in drawer against the machine's record of sales. 
C)  A receipt is issued for each transaction. 
D)  All of the above are steps in the daily control over cash receipts over the counter. 
A)  The cash drawer opens when the clerk enters a transaction. 
B)  At the end of the day, a manager proves the cash by comparing the cash in drawer against the machine's record of sales. 
C)  A receipt is issued for each transaction. 
D)  All of the above are steps in the daily control over cash receipts over the counter.

Question 9

Internal auditors are completely independent of the business.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is TRUE if a company's cash balance does NOT equal the balance on its bank statement?

Accepted Answer

A)  The bank has made a mistake. 
B)  The company's bank usually does not equal the balance on its bank statement. 
C)  The company's accountant has made a mistake. 
D)  Both the accountant and the bank have made mistakes. 
A)  The bank has made a mistake. 
B)  The company's bank usually does not equal the balance on its bank statement. 
C)  The company's accountant has made a mistake. 
D)  Both the accountant and the bank have made mistakes.

Question 11

The cornerstone of internal control procedures is:

Accepted Answer

A)  having competent, reliable and ethical personnel. 
B)  having periodic audits. 
C)  having inventory control. 
D)  having separation of duties. 
A)  having competent, reliable and ethical personnel. 
B)  having periodic audits. 
C)  having inventory control. 
D)  having separation of duties.

Question 12

of the following is the entry to establish a petty cash account?

Accepted Answer

A)  Miscellaneous expense
Cash in bank 
B)  Miscellaneous expense
Petty cash 
C)  Petty cash
Cash in bank 
D)  Cash in bank
Petty cash 
A)  Miscellaneous expense
Cash in bank 
B)  Miscellaneous expense
Petty cash 
C)  Petty cash
Cash in bank 
D)  Cash in bank
Petty cash

Question 13

lock-box system is a system of internal control over cash payments.

Accepted Answer

A) True 
 B)False

Question 14

of the following is a fund containing a small amount of cash that is used to pay for minor expenditures?

Accepted Answer

A)  A cash payments fund 
B)  A petty cash fund 
C)  An expenditure fund 
D)  An expense fund 
A)  A cash payments fund 
B)  A petty cash fund 
C)  An expenditure fund 
D)  An expense fund

Question 15

mailroom's comparison of the bank deposit amount to the debit made to cash by the accounting department is an important part of the internal control of cash receipts by mail.

Accepted Answer

A) True 
 B)False

Question 16

point-of-sale terminal (cash register) is an important part of the internal control over cash receipts over the counter.

Accepted Answer

A) True 
 B)False

Question 17

web site such as AOL4Free.com is an example of:

Accepted Answer

A)  a Trojan. 
B)  phishing. 
C)  encryption. 
D)  a firewall. 
A)  a Trojan. 
B)  phishing. 
C)  encryption. 
D)  a firewall.

Question 18

of the following documents should be examined by the controller or treasurer before signing a check?

Accepted Answer

A)  The invoice 
B)  The purchase order 
C)  The receiving report 
D)  Good internal control would require that all of these documents be examined. 
A)  The invoice 
B)  The purchase order 
C)  The receiving report 
D)  Good internal control would require that all of these documents be examined.

Question 19

At the West Texas Clothing Store, a sales employee assists customers with finding the items the client wishes to purchase, ringing up the purchase and collecting the cash. At the end of the day, this employee counts the cash and fills out a cash-count form. Which internal control procedure is being violated by West Texas Clothing Store?

Accepted Answer

A)  Competent, reliable, and ethical personnel should be hired. 
B)  Job rotation improves internal control. 
C)  To validate their accounting records, a company should have an audit by an external accountant. 
D)  Separation of duties is necessary. 
A)  Competent, reliable, and ethical personnel should be hired. 
B)  Job rotation improves internal control. 
C)  To validate their accounting records, a company should have an audit by an external accountant. 
D)  Separation of duties is necessary.

Question 20

of the following is possible due to online banking?

Accepted Answer

A)  The depositor can reconcile to the bank's balance at any time. 
B)  The bank reconciliation is not necessary. 
C)  The depositor can request a paper bank reconciliation at any time. 
D)  A company's book balance will always equal the bank's balance. 
A)  The depositor can reconcile to the bank's balance at any time. 
B)  The bank reconciliation is not necessary. 
C)  The depositor can request a paper bank reconciliation at any time. 
D)  A company's book balance will always equal the bank's balance.

Exam 7: Internal Control and Cash

Which of the following signatures (or initials) should appear on a completed petty cash ticket?

Which of the following motivates most companies to use a lock-box system?

Which of the following describes the internal control component "information system"?

Which of the following is true of an Electronic Data Interchange payment?

Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate.

A security guard at a Wal-Mart costs about $28,000 a year. On average, each guard prevents about $50,000 of theft. Which of the following internal control concepts does this illustrate?

At the West Texas Clothing Store, the same employee that sold merchandise rings up returned merchandise and refunds the cash. Which internal control procedure is being violated by West Texas Clothing Store?

of the following is a step in the daily control over cash receipts over the counter?

Internal auditors are completely independent of the business.

Which of the following statements is TRUE if a company's cash balance does NOT equal the balance on its bank statement?

The cornerstone of internal control procedures is:

of the following is the entry to establish a petty cash account?

lock-box system is a system of internal control over cash payments.

of the following is a fund containing a small amount of cash that is used to pay for minor expenditures?

mailroom's comparison of the bank deposit amount to the debit made to cash by the accounting department is an important part of the internal control of cash receipts by mail.

point-of-sale terminal (cash register) is an important part of the internal control over cash receipts over the counter.

web site such as AOL4Free.com is an example of:

of the following documents should be examined by the controller or treasurer before signing a check?

of the following is possible due to online banking?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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