Exam 11: Other Benefits and Reimbursements

Assume that a store collects cash every day, and records the amount. It then sends an employee to deposit the money in the bank. The employee steals some of the money, and deposits the rest. (True or false) A company that carefully prepares bank reconciliations will be likely to discover that this kind of theft is occurring.

The fact that a company has deposited funds at the bank late at night on December 31, which were not processed by its bank until January 2, means that the bank's records will show a lower December 31 account balance than the company's books will show.

It is a good control practice to make sure that the same person who is responsible for authorizing transactions is also responsible for recording them and handling the assets related to the transaction.

Investigating reported variances from budget can sometimes help to uncover errors in accounting.

The double entry system of bookkeeping is used because it is cheap, but it does not have any significant internal control functions.

A "general ledger" typically contains separate accounts for every classification of asset, liability, equity, revenue, dividend, and expense that a company has, sorted by account.

Fraud can be due to inadvertent errors.

The accounts payable account normally has a debit balance.

A company has a policy that the accounting department personnel who keep records of inventory must never actually be the ones who have custody of the inventory. This is an example of which type of general accounting control?

Objectives of internal controls control which of the following?

The fact that a company has deposited funds at the bank late at night on December 31, which were not processed by its bank until January 2, means that the bank's records will show a higher December 31 account balance than the company's books will show.

The fact that a company has written checks that have not yet been processed by its bank means that the bank's records will show a higher account balance than the company's books will show.

One of the objectives of company internal control systems is to ensure accurate and reliable financial reporting.

Whenever possible, the functions of authorization, recording, and custody should all be performed by the same person.

A company has a policy of having bank reconciliations prepared every month by an employee who has no other duties with respect to cash. This is an example of which type of general accounting control?

Company internal control systems are entirely devoted to ensuring that company employees safeguard company assets, and are not intended to ensure that companies follow laws and regulations.

A company has a policy that a receipt has to be created every time a customer makes a payment. This is an example of which type of general accounting control?

Training employees thoroughly before they assume important responsibilities is an example of a preventive control.

"Segregation of duties" means that different people should be responsible for the steps of authorizing transactions, recording them, and actually handling the assets related to a transaction.

Fraudulent misstatements are usually easier to detect than errors.