Question 1

If a check correctly written and paid by the bank for $427 is incorrectly recorded on the company's books for $472, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A)  add $45 to the bank's balance. 
B)  add $45 to the book's balance. 
C)  deduct $45 from the bank's balance. 
D)  deduct $427 from the book's balance.

Question 2

Carothers Company assembled the following information in completing its March bank reconciliation: balance per bank $7,640; outstanding checks $1,550; deposits in transit $2,500; NSF check $160; bank service charge $50; cash balance per books $8,800. As a result of this reconciliation, Carothers will

Accepted Answer

A)  reduce its cash account by $50. 
B)  reduce its cash account by $210. 
C)  reduce its cash account by $950. 
D)  increase its cash account by $110.

Question 3

Which of the following is not one of the main factors that contribute to fraudulent activity?

Accepted Answer

A)  Opportunity. 
B)  Incompatible duties. 
C)  Financial Pressure. 
D)  Rationalization.

Question 4

GAAP's accounting and internal control procedures related to cash and the definition of cash equivalents, as compared to IFRS are: $\begin{array}{cc}
\underline{\text { Accounting and internal control procedures }} & \underline{\text { Definition of cash equivalents }} \\end{array}$
A)$\begin{array}{cc} &&&&\text { essentially similar } &&&&&&&&&& \text { essentially similar } \\end{array}$
B)$\begin{array}{cc}&&&&\text { essentially different } &&&&&&&&& \text { essentially similar } \\end{array}$
C)$\begin{array}{cc}&&&&\text { essentially similar } &&&&&&&&&& \text { essentially different } \\end{array}$
D)$\begin{array}{cc}&&&&\text { essentially different } &&&&&&&&& \text { essentially different }
\end{array}$ IFRS

Accepted Answer

The answer of GAAP's accounting and internal control procedures related...

Question 5

A bank reconciliation should be prepared

Accepted Answer

A)  whenever the bank refuses to lend the company money. 
B)  when an employee is suspected of fraud. 
C)  to explain any difference between the depositor's balance per books and the balance per bank. 
D)  by the person who is authorized to sign checks.

Question 6

The use of remittance advices for mail receipts is an example of

Accepted Answer

A)  documentation procedures. 
B)  other controls. 
C)  physical controls. 
D)  independent internal verification.

Question 7

In large companies, the independent internal verification procedure is often assigned to

Accepted Answer

A)  computer operators. 
B)  management. 
C)  internal auditors. 
D)  outside CPAs.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

For efficiency of operations and better control over cash, a company should maintain only one bank account.

Accepted Answer

A) True 
 B)False

Question 10

If a check correctly written and paid by the bank for $584 is incorrectly recorded on the company's books for $548, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A)  deduct $36 from the book's balance. 
B)  add $36 to the book's balance. 
C)  deduct $36 from the bank's balance. 
D)  deduct $584 from the book's balance.

Question 11

Rebekah Grace has worked for Specoly Inc., for 20 years without taking a vacation. An internal control feature that would address this situation would be

Accepted Answer

A)  other controls. 
B)  establishment of responsibility. 
C)  physical controls. 
D)  documentation procedures.

Question 12

A $100 petty cash fund has cash of $12 and receipts of $85. The journal entry to replenish the account would include a credit to

Accepted Answer

A)  Cash for $88. 
B)  Petty Cash for $88. 
C)  Cash Over and Short for $2. 
D)  Cash for $85.

Question 13

All of the following would involve a debit memorandum except

Accepted Answer

A)  a bank service charge. 
B)  an NSF check. 
C)  the cost of printing checks. 
D)  interest earned.

Question 14

Reconciling the bank statement monthly is an example of

Accepted Answer

A)  segregation of duties. 
B)  independent internal verification. 
C)  establishment of responsibility. 
D)  documentation procedures.

Question 15

Management is responsible for establishing a system of internal control.

Accepted Answer

A) True 
 B)False

Question 16

Internal controls are concerned with

Accepted Answer

A)  only manual systems of accounting. 
B)  the extent of government regulations. 
C)  safeguarding assets. 
D)  preparing income tax returns.

Question 17

On a bank reconciliation, deposits in transit are

Accepted Answer

A)  added to the bank balance. 
B)  deducted from the bank balance. 
C)  added to the book balance. 
D)  deducted from the book balance.

Question 18

Internal control is most effective when several people are responsible for a given task.

Accepted Answer

A) True 
 B)False

Question 19

Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices Act of 1977

Accepted Answer

A)  may do so legally by obtaining an exemption. 
B)  will be automatically dissolved. 
C)  may be subject to fines and officer imprisonment. 
D)  may be forced to sell their foreign subsidiaries.

Question 20

Control over cash disbursements is generally more effective when

Accepted Answer

A)  all bills are paid in cash. 
B)  disbursements are made by the accounts payable subsidiary clerk. 
C)  payments are made by check. 
D)  all purchases are made on credit.

Exam 7: Fraud, Internal Control, and Cash

If a check correctly written and paid by the bank for $427 is incorrectly recorded on the company's books for $472, the appropriate treatment on the bank reconciliation would be to

Which of the following is not one of the main factors that contribute to fraudulent activity?

A bank reconciliation should be prepared

The use of remittance advices for mail receipts is an example of

In large companies, the independent internal verification procedure is often assigned to

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

For efficiency of operations and better control over cash, a company should maintain only one bank account.

If a check correctly written and paid by the bank for $584 is incorrectly recorded on the company's books for $548, the appropriate treatment on the bank reconciliation would be to

Rebekah Grace has worked for Specoly Inc., for 20 years without taking a vacation. An internal control feature that would address this situation would be

A $100 petty cash fund has cash of $12 and receipts of $85. The journal entry to replenish the account would include a credit to

All of the following would involve a debit memorandum except

Reconciling the bank statement monthly is an example of

Management is responsible for establishing a system of internal control.

Internal controls are concerned with

On a bank reconciliation, deposits in transit are

Internal control is most effective when several people are responsible for a given task.

Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices Act of 1977

Control over cash disbursements is generally more effective when