Question 1

Internal control is defined, in part, as a plan that safeguards

Accepted Answer

A)  all balance sheet accounts.
B)  assets.
C)  liabilities.
D)  capital stock.E) C) and D)
F) None of the above

Question 2

The custodian of a company asset should

Accepted Answer

A)  have access to the accounting records for that asset.
B)  be someone outside the company.
C)  not have access to the accounting records for that asset.
D)  be an accountant.E) B) and C)
F) All of the above

Question 3

All of the following are true regarding the management and monitoring of cash except

Accepted Answer

A)  companies may have plenty of sales, but insufficient cash to support operations.
B)  the cash to cash operating cycle for a manufacturer is generally shorter than that of a merchandising company.
C)  manufacturers may experience a significant lag between the purchase of raw materials and the receipt of cash from customers.
D)  companies should have sufficient cash to meet payments but minimize the amount of non-revenue-generating cash on hand.E) A) and D)
F) A) and C)

Question 4

All of the following actions would strengthen internal control over a petty cash fund except

Accepted Answer

A)  surprise counts by a supervisor.
B)  cancellation of paid vouchers.
C)  submission of supporting documents.
D)  multiple petty cash custodians.E) B) and D)
F) A) and D)

Question 5

The principle of establishing responsibility does not include

Accepted Answer

A)  one person being responsible for one task.
B)  authorization of transactions.
C)  independent internal verification.
D)  approval of transactions.E) B) and C)
F) B) and D)

Question 6

The principles of internal control activities are used

Accepted Answer

A)  in the U.S.but not globally.
B)  internationally but not in the U.S.
C)  in the U.S.and Canada but not globally.
D)  globally.E) A) and B)
F) C) and D)

Question 7

Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated?

Accepted Answer

A)  None, Ron has proven to be trustworthy and has enough experience to do a good job.
B)  Documentation procedures.
C)  Establishment of responsibilities.
D)  Segregation of duties.E) A) and B)
F) None of the above

Question 8

Internal auditors

Accepted Answer

A)  are hired by CPA firms to audit business firms.
B)  are employees of the IRS who evaluate the internal controls of companies filing tax returns.
C)  evaluate the system of internal controls for the companies that employ them.
D)  cannot evaluate the system of internal controls of the company that employs them because they are not independent.E) A) and C)
F) None of the above

Question 9

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of

Accepted Answer

A)  establishment of responsibility is violated.
B)  independent internal verification is violated.
C)  documentation procedures is violated.
D)  separation of duties is violated.E) B) and D)
F) B) and C)

Question 10

The control principle related to not having the same person authorize and pay for goods is known as

Accepted Answer

A)  establishment of responsibility.
B)  independent internal verification.
C)  separation of duties.
D)  rotation of duties.E) A) and C)
F) All of the above

Question 11

Related purchasing activities include

Accepted Answer

A)  ordering, receiving, paying.
B)  ordering, selling, paying.
C)  ordering, shipping, billing.
D)  selling, shipping, paying.E) A) and D)
F) All of the above

Question 12

Checks received in the mail should be immediately stamped "NSF" to prevent unauthorized cashing of the check.

Accepted Answer

A) True 
 B)False

Question 13

A petty cash fund is used to pay relatively large amounts.

Accepted Answer

A) True 
 B)False

Question 14

In preparing a bank reconciliation, outstanding checks are

Accepted Answer

A)  added to the balance per bank.
B)  deducted from the balance per books.
C)  added to the balance per books.
D)  deducted from the balance per bank.E) All of the above
F) None of the above

Question 15

Bonding involves all of the following except

Accepted Answer

A)  The company obtains insurance protection against misappropriation of assets by a dishonest employee.
B)  The insurance company screens employees before they are added to the policy.
C)  The company informs employees that the insurance company will vigorously prosecute all offenders.
D)  Employees do not commit inappropriate acts because of the threat of prosecution and their loyalty to the employer.E) None of the above
F) C) and D)

Question 16

In the month of November Gavin Company Inc. wrote checks in the amount of $55,500. In December, checks in the amount of $75,948 were written. In November, $50,808 of these checks were presented to the bank for payment, and $65,298 in December. What is the amount of outstanding checks at the end of December?

Accepted Answer

A)  $10,650.
B)  $15,342.
C)  $4,692.
D)  $21,300.E) A) and C)
F) B) and C)

Question 17

Only large companies need to be concerned with a system of internal control.

Accepted Answer

A) True 
 B)False

Question 18

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 with the balance per bank.
D)  by the person who is authorized to sign checks.E) B) and D)
F) None of the above

Question 19

If a check correctly written and paid by the bank for $491 is incorrectly recorded on the company's books for $419, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A)  add $72 to the book's balance.
B)  subtract $72 from the book's balance.
C)  deduct $72 from the bank's balance.
D)  deduct $491 from the book's balance.E) A) and D)
F) A) and C)

Question 20

The separation of duties feature of internal control can be negated when several employees are involved in a scheme.

Accepted Answer

A) True 
 B)False

Exam 6: Fraud, Internal Control, and Cash

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of

Correct Answer
verified

Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated?

Correct Answer
verified

Only large companies need to be concerned with a system of internal control.

Correct Answer
verified

The separation of duties feature of internal control can be negated when several employees are involved in a scheme.

Correct Answer
verified

All of the following actions would strengthen internal control over a petty cash fund except

Correct Answer
verified

Internal control is defined, in part, as a plan that safeguards

Correct Answer
verified

Correct Answer
verified

A petty cash fund is used to pay relatively large amounts.

Correct Answer
verified

Bonding involves all of the following except

Correct Answer
verified

Checks received in the mail should be immediately stamped "NSF" to prevent unauthorized cashing of the check.

Correct Answer
verified

A bank reconciliation should be prepared

Correct Answer
verified

Internal auditors

Correct Answer
verified

The principles of internal control activities are used

Correct Answer
verified

If a check correctly written and paid by the bank for $491 is incorrectly recorded on the company's books for $419, the appropriate treatment on the bank reconciliation would be to

Correct Answer
verified

The control principle related to not having the same person authorize and pay for goods is known as

Correct Answer
verified

The principle of establishing responsibility does not include

Correct Answer
verified

In preparing a bank reconciliation, outstanding checks are

Correct Answer
verified

All of the following are true regarding the management and monitoring of cash except

Correct Answer
verified

Related purchasing activities include

Correct Answer
verified

The custodian of a company asset should

Correct Answer
verified

Exam 6: Fraud, Internal Control, and Cash

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of

Correct AnswerverifiedShow Answer

Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated?

Correct AnswerverifiedShow Answer

Only large companies need to be concerned with a system of internal control.

Correct AnswerverifiedShow Answer

The separation of duties feature of internal control can be negated when several employees are involved in a scheme.

Correct AnswerverifiedShow Answer

All of the following actions would strengthen internal control over a petty cash fund except

Correct AnswerverifiedShow Answer

Internal control is defined, in part, as a plan that safeguards

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A petty cash fund is used to pay relatively large amounts.

Correct AnswerverifiedShow Answer

Bonding involves all of the following except

Correct AnswerverifiedShow Answer

Checks received in the mail should be immediately stamped "NSF" to prevent unauthorized cashing of the check.

Correct AnswerverifiedShow Answer

A bank reconciliation should be prepared

Correct AnswerverifiedShow Answer

Internal auditors

Correct AnswerverifiedShow Answer

The principles of internal control activities are used

Correct AnswerverifiedShow Answer

If a check correctly written and paid by the bank for $491 is incorrectly recorded on the company's books for $419, the appropriate treatment on the bank reconciliation would be to

Correct AnswerverifiedShow Answer

The control principle related to not having the same person authorize and pay for goods is known as

Correct AnswerverifiedShow Answer

The principle of establishing responsibility does not include

Correct AnswerverifiedShow Answer

In preparing a bank reconciliation, outstanding checks are

Correct AnswerverifiedShow Answer

All of the following are true regarding the management and monitoring of cash except

Correct AnswerverifiedShow Answer

Related purchasing activities include

Correct AnswerverifiedShow Answer

The custodian of a company asset should

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified