Question 1

Which of the following is desirable in a good system of internal accounting control?

Accepted Answer

A)  All accounting personnel in a company should be Certified Public Accountants 
B)  Appropriate forms, such as checks and sales invoices, should be prenumbered 
C)  To obtain the benefit of specialization, employees should not be rotated among jobs 
D)  Responsibility and authority for a given function should be shared among several employees 
A)  All accounting personnel in a company should be Certified Public Accountants 
B)  Appropriate forms, such as checks and sales invoices, should be prenumbered 
C)  To obtain the benefit of specialization, employees should not be rotated among jobs 
D)  Responsibility and authority for a given function should be shared among several employees

Question 2

Control activities are the policies and procedures that management has adopted to provide reasonable assurance that the financial reports are accurate and that the company's objective are being met. List the five categories of control activities and give a specific example of each.

Accepted Answer

@#IMG-DLM& *Answers

Question 3

The internal audit manager reports directly to the

Accepted Answer

A)  Controller 
B)  Public Company Accounting Oversight Board 
C)  Accounting committee 
D)  Audit committee 
A)  Controller 
B)  Public Company Accounting Oversight Board 
C)  Accounting committee 
D)  Audit committee

Question 4

If two different accountants were to estimate the percentage of customers who will NOT pay their accounts (bad debts), they could arrive at different estimates. These differing estimates would affect the financial statements. Such differences in assessing estimates are due to

Accepted Answer

A)  Fraudulent financial reporting 
B)  Errors in accounts and ledgers 
C)  Disagreements in judgment 
D)  Lack of internal controls 
A)  Fraudulent financial reporting 
B)  Errors in accounts and ledgers 
C)  Disagreements in judgment 
D)  Lack of internal controls

Question 5

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

A)  Expenses will be overstated 
B)  Assets will be overstated 
C)  Revenues will be understated 
D)  Owner's equity will be understated 
A)  Expenses will be overstated 
B)  Assets will be overstated 
C)  Revenues will be understated 
D)  Owner's equity will be understated

Question 6

Which of the following is NOT one of the five basic categories of internal control?

Accepted Answer

A)  Monitoring 
B)  Control environment 
C)  Control activities 
D)  Auditing system 
A)  Monitoring 
B)  Control environment 
C)  Control activities 
D)  Auditing system

Question 7

Recording Rent Expense as Wage Expense

Accepted Answer

A)  Overstates income 
B)  Understates expenses 
C)  Understates owner's equity 
D)  None of these are correct 
A)  Overstates income 
B)  Understates expenses 
C)  Understates owner's equity 
D)  None of these are correct

Question 8

The control environment can be defined as

Accepted Answer

A)  The lines of authority and responsibility within a company. 
B)  The actions, policies, and procedures that reflect the overall attitudes of top management about control. 
C)  The members of a company's board of directors who are responsible for dealing with the external and internal auditors. 
D)  The policies and procedures used by management to meet their objectives. 
A)  The lines of authority and responsibility within a company. 
B)  The actions, policies, and procedures that reflect the overall attitudes of top management about control. 
C)  The members of a company's board of directors who are responsible for dealing with the external and internal auditors. 
D)  The policies and procedures used by management to meet their objectives.

Question 9

Which of the following statements is true about disagreements in the financial statements of a company?

Accepted Answer

A)  Disagreements are a result of intentional mistakes made while recording or posting transactions. 
B)  Disagreements are not intentional and when detected are immediately corrected. 
C)  Disagreements result when different people arrive at different conclusions based on the same set of facts. 
D)  Disagreements are usually an intentional attempt at fraud. 
A)  Disagreements are a result of intentional mistakes made while recording or posting transactions. 
B)  Disagreements are not intentional and when detected are immediately corrected. 
C)  Disagreements result when different people arrive at different conclusions based on the same set of facts. 
D)  Disagreements are usually an intentional attempt at fraud.

Question 10

Which of the following requires CPAs to provide reasonable assurance that significant fraud or misstatement is NOT present in financial statements?

Accepted Answer

A)  Generally Accepted Auditing Standards 
B)  Generally Accepted Accounting Principles 
C)  Sarbanes-Oxley Act 
D)  Foreign Corrupt Practices Act 
A)  Generally Accepted Auditing Standards 
B)  Generally Accepted Accounting Principles 
C)  Sarbanes-Oxley Act 
D)  Foreign Corrupt Practices Act

Question 11

Which of the following statements is true about errors in the financial statements of a company?

Accepted Answer

A)  Errors are a result of intentional mistakes made while recording or posting transactions. 
B)  Errors are not intentional and when detected are immediately corrected. 
C)  Errors are not intentional and therefore do not need to be corrected. 
D)  Errors are usually an intentional attempt at fraud. 
A)  Errors are a result of intentional mistakes made while recording or posting transactions. 
B)  Errors are not intentional and when detected are immediately corrected. 
C)  Errors are not intentional and therefore do not need to be corrected. 
D)  Errors are usually an intentional attempt at fraud.

Question 12

A collection of an account receivable was erroneously recorded and posted as a debit to Cash and a credit to Consulting Fees Revenue. The journal entry to correct this error would be

Accepted Answer

A)  A debit to Cash and a credit to Accounts Receivable 
B)  A debit to Accounts Receivable and a credit to Consulting Fees Revenue 
C)  A debit to Consulting Fees Revenue and a credit to Unearned Consulting Fees 
D)  A debit to Consulting Fees Revenue and a credit to Accounts Receivable 
A)  A debit to Cash and a credit to Accounts Receivable 
B)  A debit to Accounts Receivable and a credit to Consulting Fees Revenue 
C)  A debit to Consulting Fees Revenue and a credit to Unearned Consulting Fees 
D)  A debit to Consulting Fees Revenue and a credit to Accounts Receivable

Question 13

Which of the following is NOT one of the effects that the Securities Exchange Act of 1934 had on accountants?

Accepted Answer

A)  Accountants must audit all 10-K reports. 
B)  Accountants must audit all 10-Q reports. 
C)  Accountants' work is subject to approval by the SEC 
D)  All of these are effects of the Securities Exchange Act of 1934. 
A)  Accountants must audit all 10-K reports. 
B)  Accountants must audit all 10-Q reports. 
C)  Accountants' work is subject to approval by the SEC 
D)  All of these are effects of the Securities Exchange Act of 1934.

Question 14

If an employee steals cash from a company and successfully covers up his/her actions by recording a fictitious debit to Accounts Payable and a credit to Cash, then

Accepted Answer

A)  Liabilities will be overstated 
B)  Liabilities will be understated 
C)  Assets will be overstated 
D)  Assets will be understated 
A)  Liabilities will be overstated 
B)  Liabilities will be understated 
C)  Assets will be overstated 
D)  Assets will be understated

Question 15

Which of the following groups of control activities are considered detective controls?

Accepted Answer

A)  Segregation of duties and physical control over assets and records 
B)  Adequate documents and records and independent checks on performance 
C)  Segregation of duties and adequate documents and records 
D)  Independent checks on performance and physical control over assets and records 
A)  Segregation of duties and physical control over assets and records 
B)  Adequate documents and records and independent checks on performance 
C)  Segregation of duties and adequate documents and records 
D)  Independent checks on performance and physical control over assets and records

Question 16

If an employee steals cash from a company and tries to cover up his/her actions by recording a fictitious debit to Prepaid Insurance and a credit to Cash, then

Accepted Answer

A)  Expenses will be understated 
B)  Assets will be overstated 
C)  Assets will be understated 
D)  Assets will be stated correctly 
A)  Expenses will be understated 
B)  Assets will be overstated 
C)  Assets will be understated 
D)  Assets will be stated correctly

Question 17

Using independent reviewers, such as auditors, is an example of which type of accounting procedure?

Accepted Answer

A)  Physical control over records 
B)  Adequate documents and records 
C)  Proper procedures for authorization 
D)  Independent checks on performance 
A)  Physical control over records 
B)  Adequate documents and records 
C)  Proper procedures for authorization 
D)  Independent checks on performance

Question 18

Which of the following is NOT one of the major safeguards in the financial reporting process?

Accepted Answer

A)  Earnings management 
B)  Internal controls 
C)  Internal auditors 
D)  External auditors 
A)  Earnings management 
B)  Internal controls 
C)  Internal auditors 
D)  External auditors

Question 19

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

A)  Expenses will be understated 
B)  Owner's equity will be overstated 
C)  Net income will be overstated 
D)  All of these are true 
A)  Expenses will be understated 
B)  Owner's equity will be overstated 
C)  Net income will be overstated 
D)  All of these are true

Question 20

Internal earnings targets represent an important tool in motivating managers to increase sales efforts, control costs, and use resources more efficiently. Such internal targets also can cause managers to resort to extreme measures in order to meet goals established by upper management. Earnings management often appears in a variety of forms as a means of reaching these internal goals.
Earnings management also is associated with earnings-based internal bonus plans which are also a form of internal target.
Explain how earnings management is related to earnings-based internal bonus plans and how managers behave in response to such plans.

Accepted Answer

Academic research has shown that manager

Exam 5: Internal Controls: Ensuring the Integrity of Financial Information

Which of the following is desirable in a good system of internal accounting control?

Control activities are the policies and procedures that management has adopted to provide reasonable assurance that the financial reports are accurate and that the company's objective are being met. List the five categories of control activities and give a specific example of each.

The internal audit manager reports directly to the

If two different accountants were to estimate the percentage of customers who will NOT pay their accounts (bad debts), they could arrive at different estimates. These differing estimates would affect the financial statements. Such differences in assessing estimates are due to

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

Which of the following is NOT one of the five basic categories of internal control?

Recording Rent Expense as Wage Expense

The control environment can be defined as

Which of the following statements is true about disagreements in the financial statements of a company?

Which of the following requires CPAs to provide reasonable assurance that significant fraud or misstatement is NOT present in financial statements?

Which of the following statements is true about errors in the financial statements of a company?

A collection of an account receivable was erroneously recorded and posted as a debit to Cash and a credit to Consulting Fees Revenue. The journal entry to correct this error would be

Which of the following is NOT one of the effects that the Securities Exchange Act of 1934 had on accountants?

If an employee steals cash from a company and successfully covers up his/her actions by recording a fictitious debit to Accounts Payable and a credit to Cash, then

Which of the following groups of control activities are considered detective controls?

If an employee steals cash from a company and tries to cover up his/her actions by recording a fictitious debit to Prepaid Insurance and a credit to Cash, then

Using independent reviewers, such as auditors, is an example of which type of accounting procedure?

Which of the following is NOT one of the major safeguards in the financial reporting process?

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

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