Question 1

Smart hiring practices and separation of duties is part of the control environment.

Accepted Answer

A) True 
 B)False

Question 2

The following are examples of items that appear on a bank reconciliation. Classify each item as (a) an addition to the bank balance, (b) a subtraction from the bank balance, (c) an addition to the book balance, or (d) a subtraction from the book balance.
1. NSF check
2. Deposits in transit
3. Interest earnings
4. Bank error - the bank credited the company's account for a deposit made by another customer
5. EFT rent collection
6. Service charge
7. Book error - the company credited cash for $100 when the correct amount was $1,000
8. Outstanding checks
9. Bank collection of a note receivable on behalf of the company

Accepted Answer

1. d, 2. a, 3. c, 4.

Question 3

The book side of a bank reconciliation includes:

Accepted Answer

A)  deposits in transit, bank collections and NSF checks. 
B)  NSF checks, bank collections and interest earned on the checking account. 
C)  outstanding checks and deposits in transit. 
D)  outstanding checks, NSF checks and cost of printed checks. 
A)  deposits in transit, bank collections and NSF checks. 
B)  NSF checks, bank collections and interest earned on the checking account. 
C)  outstanding checks and deposits in transit. 
D)  outstanding checks, NSF checks and cost of printed checks.

Question 4

Fraud is a major problem.

Accepted Answer

A) True 
 B)False

Question 5

All employees should have a background check before being hired, and should be properly trained and supervised.

Accepted Answer

A) True 
 B)False

Question 6

Which is NOT a component of comparisons and compliance monitoring?

Accepted Answer

A)  Proper approvals 
B)  Operating budgets 
C)  Audit 
D)  Exception reporting 
A)  Proper approvals 
B)  Operating budgets 
C)  Audit 
D)  Exception reporting

Question 7

When a company is determining its risk assessment:

Accepted Answer

A)  the risks for all companies in the same industry must be the same. 
B)  the risks will offer hints of where fraud or mistakes may arise. 
C)  it must report the risks to the SEC. 
D)  it must report the risks to the PCAOB. 
A)  the risks for all companies in the same industry must be the same. 
B)  the risks will offer hints of where fraud or mistakes may arise. 
C)  it must report the risks to the SEC. 
D)  it must report the risks to the PCAOB.

Question 8

Creating bogus websites for the purpose of stealing unauthorized data is a(n):

Accepted Answer

A)  encryption device. 
B)  phishing expedition. 
C)  computer virus. 
D)  Trojan horse. 
A)  encryption device. 
B)  phishing expedition. 
C)  computer virus. 
D)  Trojan horse.

Question 9

A cash receipt from a customer for which there are not sufficient funds in the bank to cover the amount is a(n):

Accepted Answer

A)  service charge. 
B)  error. 
C)  nonsufficient funds check. 
D)  blank check. 
A)  service charge. 
B)  error. 
C)  nonsufficient funds check. 
D)  blank check.

Question 10

When reporting cash on the balance sheet, companies:

Accepted Answer

A)  show each bank account separately. 
B)  combine cash with accounts receivable. 
C)  include any restricted amounts. 
D)  combine cash and cash equivalents. 
A)  show each bank account separately. 
B)  combine cash with accounts receivable. 
C)  include any restricted amounts. 
D)  combine cash and cash equivalents.

Question 11

________ is the element in the fraud triangle results from either critical need or greed on the part of the perpetrator.

Accepted Answer

A)  Motive 
B)  Opportunity 
C)  Rationalization 
D)  Reasoning 
A)  Motive 
B)  Opportunity 
C)  Rationalization 
D)  Reasoning

Question 12

The information system component of internal control:

Accepted Answer

A)  ensures that every system that processes accounting data should have the ability to capture transactions as they occur. 
B)  monitors controls. 
C)  offers hints of where fraud or errors could occur. 
D)  ensures that the IT department has adequate control procedures in place to ensure that no one can hack into the company's database. 
A)  ensures that every system that processes accounting data should have the ability to capture transactions as they occur. 
B)  monitors controls. 
C)  offers hints of where fraud or errors could occur. 
D)  ensures that the IT department has adequate control procedures in place to ensure that no one can hack into the company's database.

Question 13

The owner of ABC Inc. has reason to believe that an employee has been stealing cash from the company. The employee receives cash from clients, makes the bank deposit, and also prepares the monthly bank reconciliation. To check up on the employee, the owner prepares his own bank reconciliation, as follows:
   Does it appear the employee has stolen from the company? If so, how much? Explain your answer.
Which side of the bank reconciliation shows the company's true cash balance?

Accepted Answer

Yes, it appears the employee has stolen

Question 14

The two most common types of fraud impacting financial statements are:

Accepted Answer

A)  fraudulent financial reporting and e-commerce fraud. 
B)  misappropriation of assets and embezzlement. 
C)  fraudulent financial reporting and misappropriation of assets. 
D)  cooking the books and fraudulent financial reporting. 
A)  fraudulent financial reporting and e-commerce fraud. 
B)  misappropriation of assets and embezzlement. 
C)  fraudulent financial reporting and misappropriation of assets. 
D)  cooking the books and fraudulent financial reporting.

Question 15

The person to whom a check is paid is referred to as the drawee.

Accepted Answer

A) True 
 B)False

Question 16

Access to sensitive data files should be protected by passwords and data encryption.

Accepted Answer

A) True 
 B)False

Question 17

The entry to establish the petty cash fund is:

Accepted Answer

A)  a debit to Miscellaneous Expense and a credit to Cash. 
B)  a debit to Miscellaneous Expense and a credit to Petty Cash. 
C)  a debit to Petty Cash and a credit to Cash. 
D)  a debit to Cash and a credit to Petty Cash. 
A)  a debit to Miscellaneous Expense and a credit to Cash. 
B)  a debit to Miscellaneous Expense and a credit to Petty Cash. 
C)  a debit to Petty Cash and a credit to Cash. 
D)  a debit to Cash and a credit to Petty Cash.

Question 18

Cash equivalents include accounts receivable expected to be collected within 90 days or less.

Accepted Answer

A) True 
 B)False

Question 19

E-commerce pitfalls include all of the following EXCEPT:

Accepted Answer

A)  stolen credit card numbers. 
B)  phishing expedition. 
C)  encryption reporting. 
D)  trojan horses. 
A)  stolen credit card numbers. 
B)  phishing expedition. 
C)  encryption reporting. 
D)  trojan horses.

Question 20

When cash is received by mail:

Accepted Answer

A)  the mailroom sends all customer checks to the treasurer, who has the cashier deposit the money in the bank. 
B)  the journal entries are made by the controller. 
C)  the mailroom compares the deposit to the journal entry made. 
D)  all of the above occur. 
A)  the mailroom sends all customer checks to the treasurer, who has the cashier deposit the money in the bank. 
B)  the journal entries are made by the controller. 
C)  the mailroom compares the deposit to the journal entry made. 
D)  all of the above occur.

Smart hiring practices and separation of duties is part of the control environment.

The book side of a bank reconciliation includes:

Fraud is a major problem.

All employees should have a background check before being hired, and should be properly trained and supervised.

Which is NOT a component of comparisons and compliance monitoring?

When a company is determining its risk assessment:

Creating bogus websites for the purpose of stealing unauthorized data is a(n):

A cash receipt from a customer for which there are not sufficient funds in the bank to cover the amount is a(n):

When reporting cash on the balance sheet, companies:

________ is the element in the fraud triangle results from either critical need or greed on the part of the perpetrator.

The information system component of internal control:

The two most common types of fraud impacting financial statements are:

The person to whom a check is paid is referred to as the drawee.

Access to sensitive data files should be protected by passwords and data encryption.

The entry to establish the petty cash fund is:

Cash equivalents include accounts receivable expected to be collected within 90 days or less.

E-commerce pitfalls include all of the following EXCEPT:

When cash is received by mail:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Internal Control Cash

Smart hiring practices and separation of duties is part of the control environment.

The book side of a bank reconciliation includes:

Fraud is a major problem.

All employees should have a background check before being hired, and should be properly trained and supervised.

Which is NOT a component of comparisons and compliance monitoring?

When a company is determining its risk assessment:

Creating bogus websites for the purpose of stealing unauthorized data is a(n):

A cash receipt from a customer for which there are not sufficient funds in the bank to cover the amount is a(n):

When reporting cash on the balance sheet, companies:

________ is the element in the fraud triangle results from either critical need or greed on the part of the perpetrator.

The information system component of internal control:

The two most common types of fraud impacting financial statements are:

The person to whom a check is paid is referred to as the drawee.

Access to sensitive data files should be protected by passwords and data encryption.

The entry to establish the petty cash fund is:

Cash equivalents include accounts receivable expected to be collected within 90 days or less.

E-commerce pitfalls include all of the following EXCEPT:

When cash is received by mail:

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters