Question 1

A company's internal control system must be designed and maintained by its external auditors.

Accepted Answer

A) True 
 B)False

Question 2

Which internal control activity is being violated when the cashier in a retail store also records the daily receipts in a journal?

Accepted Answer

A)  segregation of duties 
B)  adequate documents and records 
C)  independent checks on recorded amounts 
D)  safeguards over assets and records

Question 3

Match the following terms with their correct definitions.
-collective term for procedures put into place to ensure that employees operate within the scope of their assigned responsibilities and act for the good of the business

Accepted Answer

A) accounting system 
B) business process risks 
C) control activities 
D) control environment 
E) internal control system
F)safeguarding
G)segregation of duties
H)strategic risks

Question 4

How is a credit memo treated when doing a bank reconciliation procedure?

Accepted Answer

A)  It must be recorded as a credit to the balance per the customer's records. 
B)  It must be recorded as a debit to the balance per the bank's records. 
C)  It must be recorded as a credit to the balance per the bank's records. 
D)  It must be recorded as a debit to the balance per the company's records.

Question 5

A physical count of inventory is required even though the company uses the perpetual inventory system.What internal activity control is this an example of?

Accepted Answer

A)  segregation of duties 
B)  safeguarding of assets and records 
C)  checks on recorded amounts 
D)  clearly defined authority and responsibility

Question 6

Items that are included on a bank statement and increase the bank account balance are called ____________________.

Accepted Answer

The answer of Items that are included on a bank...

Question 7

Dance Town Academy
The items listed below were identified while preparing a bank reconciliation for the company's chequing account as of March 31.
 $\begin{array}{lr}
\text { Cash balance according to the general ledger } &?\
\text { Bank statement balance } & \$ 18,500 \
\text { Outstanding cheques } & 2,700\ 
\text { Customer's bounced cheque } & 350 \
\text { Bank service charges } & 100 \
\text { Deposits in transit } & 1,000 \
\text { Interest earned on the chequing account } & 60
\end{array}$
-Refer to the figure Dance Town Academy.How will the interest earned on the chequing account be handled on a bank reconciliation?

Accepted Answer

A)  It will be added to the balance from the company records. 
B)  It will be subtracted from the balance from the company records. 
C)  It will be added to the bank statement balance. 
D)  It will be subtracted from the bank statement balance.

Question 8

Which of the following is a sound internal control procedure for cash disbursements?

Accepted Answer

A)  paying with cash, making tracking of the payment more difficult 
B)  designating an authorized cheque signer who has cash recordkeeping responsibilities 
C)  marking supporting documents when paid to prevent duplicate payment 
D)  paying with petty cash to expedite the payment process

Question 9

Which internal control activity is being followed when companies purchase bonds on those employees handling cash?

Accepted Answer

A)  segregation of duties 
B)  safeguarding of assets and records 
C)  checks on recorded amounts 
D)  human resource controls

Question 10

An accounting system must be computerized in order to ensure the company has proper internal control.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would appear on an accounting record of the business and NOT on the bank statement?

Accepted Answer

A)  service charges 
B)  outstanding cheques 
C)  credit memos 
D)  interest earned

Question 12

____________________ are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of three months or less.

Accepted Answer

The answer of ____________________ are those investments and deposits with...

Question 13

The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.)
-Cash register tapes are recorded daily by an employee from the accounting department.

Accepted Answer

A) adheres to sound internal controls 
B) violates sound internal controls 
C) neither strengthens nor violates internal control

Question 14

The sole purpose for creating an internal control system is to deter embezzlement.

Accepted Answer

A) True 
 B)False

Question 15

Match the following terms with their correct definitions.
-possible external threats to the organization's success in accomplishing its goals

Accepted Answer

A) accounting system 
B) business process risks 
C) control activities 
D) control environment 
E) internal control system
F)safeguarding
G)segregation of duties
H)strategic risks

Question 16

How are cash equivalents reported or disclosed in the financial statements?

Accepted Answer

A)  They are included with cash as a current asset on the balance sheet. 
B)  They are reported only on the statement of cash flows. 
C)  They are disclosed only in the notes to the financial statements. 
D)  They are included with short-term investments as a current asset on the balance sheet.

Question 17

What is the term for cash collected and recorded by a company but NOT yet reflected in a bank statement?

Accepted Answer

A)  debit memos 
B)  credit memos 
C)  outstanding cheques 
D)  deposits in transit

Question 18

In Canada,who regulates publically listed companies?

Accepted Answer

A)  13 securities commissions 
B)  Security and Exchange Commission 
C)  Certified Management Accountants 
D)  chartered accountants

Question 19

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-cheques on recorded amounts

Accepted Answer

A) One employee or department should verify the work of another. 
B) Specific approval is given by management for the performance of activities. 
C) Accounting and cash collections should be properly separated. 
D) Blank cheques should be stored in a locked location. 
E) Initial entry into the accounting system should be from a consistent source with complete information.

Question 20

A company's unadjusted bank balance is $3,000.Outstanding cheques amount to $500,and deposits in transit total $300.Based on this information alone,what is the company's adjusted cash balance for the purpose of preparing a bank reconciliation?

Accepted Answer

A)  $2,700 
B)  $2,800 
C)  $3,200 
D)  $3,300

Exam 2: Internal Control and Cash

A company's internal control system must be designed and maintained by its external auditors.

Which internal control activity is being violated when the cashier in a retail store also records the daily receipts in a journal?

Match the following terms with their correct definitions. -collective term for procedures put into place to ensure that employees operate within the scope of their assigned responsibilities and act for the good of the business

How is a credit memo treated when doing a bank reconciliation procedure?

A physical count of inventory is required even though the company uses the perpetual inventory system.What internal activity control is this an example of?

Items that are included on a bank statement and increase the bank account balance are called ____________________.

Which of the following is a sound internal control procedure for cash disbursements?

Which internal control activity is being followed when companies purchase bonds on those employees handling cash?

An accounting system must be computerized in order to ensure the company has proper internal control.

Which of the following would appear on an accounting record of the business and NOT on the bank statement?

____________________ are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of three months or less.

The sole purpose for creating an internal control system is to deter embezzlement.

Match the following terms with their correct definitions. -possible external threats to the organization's success in accomplishing its goals

How are cash equivalents reported or disclosed in the financial statements?

What is the term for cash collected and recorded by a company but NOT yet reflected in a bank statement?

In Canada,who regulates publically listed companies?

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -cheques on recorded amounts

A company's unadjusted bank balance is $3,000.Outstanding cheques amount to $500,and deposits in transit total $300.Based on this information alone,what is the company's adjusted cash balance for the purpose of preparing a bank reconciliation?