Question 1

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a component of the fraud triangle?

Accepted Answer

A)  Reliance 
B)  Rationalization 
C)  Opportunity 
D)  Pressure 
A)  Reliance 
B)  Rationalization 
C)  Opportunity 
D)  Pressure

Question 3

Which of the following is not a common feature of ethical misconduct?

Accepted Answer

A)  The capacity to rationalize 
B)  The existence of pressure leading to an incentive 
C)  The assistance of others 
D)  The presence of an opportunity 
A)  The capacity to rationalize 
B)  The existence of pressure leading to an incentive 
C)  The assistance of others 
D)  The presence of an opportunity

Question 4

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Requiring separation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.

Accepted Answer

A) True 
 B)False

Question 6

Even a good system of internal controls can be overridden by collusion among employees.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a primary role of an independent auditor?

Accepted Answer

A)  Assume legal and professional responsibilities to the public 
B)  Advise client on tax strategies 
C)  Determine whether a company's financial statements are materially correct 
D)  All of these answer choices are correct. 
A)  Assume legal and professional responsibilities to the public 
B)  Advise client on tax strategies 
C)  Determine whether a company's financial statements are materially correct 
D)  All of these answer choices are correct.

Question 8

In establishing a strong internal control system at Banks Company, management is concerned with administrative controls. Administrative controls include:

Accepted Answer

A)  performance evaluation. 
B)  accuracy of the recording procedures. 
C)  keeping cash in a safe. 
D)  maintenance of accurate inventory records. 
A)  performance evaluation. 
B)  accuracy of the recording procedures. 
C)  keeping cash in a safe. 
D)  maintenance of accurate inventory records.

Question 9

Effective internal controls for cash include:

Accepted Answer

A)  disbursements made by prenumbered check. 
B)  cash deposited in the bank on a timely basis. 
C)  written cash receipts given to customers as evidence of payment. 
D)  all of these answer choices are correct. 
A)  disbursements made by prenumbered check. 
B)  cash deposited in the bank on a timely basis. 
C)  written cash receipts given to customers as evidence of payment. 
D)  all of these answer choices are correct.

Question 10

Which of the following statements accurately describes a fidelity bond?

Accepted Answer

A)  Procedures to provide reasonable assurance that the objectives of a company are accomplished 
B)  Proper procedures for processing transactions. 
C)  Insurance that the company buys to protect itself from loss due to employee dishonesty 
D)  Guidelines or policies that limit the actions of different levels of management 
A)  Procedures to provide reasonable assurance that the objectives of a company are accomplished 
B)  Proper procedures for processing transactions. 
C)  Insurance that the company buys to protect itself from loss due to employee dishonesty 
D)  Guidelines or policies that limit the actions of different levels of management

Question 11

Indicate whether each of the following statements about the auditor's role in financial accounting is true or false.
_____ a) The proper conduct of an audit guarantees the accuracy of all figures on the financial statements.
_____ b) The financial statement audit is a detailed review of a company's financial statements and documents.
_____ c) The primary responsibility of the independent accounting firm is to the public.
_____ d) The most favorable type of audit report is called a qualified opinion.
_____ e) The ultimate responsibility for the financial statements lies with management of the company rather than the independent accounting firm.

Accepted Answer

a) This is false. Audits are designed to

Question 12

While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee. Which of the following shows the effect of this transaction on the financial statements?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 13

At March 31, Cummins Co. had a balance in its cash account of $10,400. At the end of March the company determined that it had outstanding checks of $900, deposits in transit of $600, a bank service charge of $20, and an NSF check from a customer for $200. The true cash balance at March 31 is:

Accepted Answer

A)  $10,100 
B)  $10,180 
C)  $10,380 
D)  $9,880 
A)  $10,100 
B)  $10,180 
C)  $10,380 
D)  $9,880

Question 14

Indicate whether each of the following statements is true or false.
_____ a) Debit memos in a bank statement describe transactions that increase the depositor's assets.
_____ b) Credit memos in a bank statement describe transactions that act to increase the bank's liabilities.
_____ c) Service fees charged by a bank appear on bank statements as credit memos.
_____ d) Deposits in transit appear on the bank statement as credit memos.
_____ e) Outstanding checks do not appear on the bank statement.

Accepted Answer

a) This is false. Debit memos decrease t

Question 15

The most favorable audit opinion that a company can receive is a(n):

Accepted Answer

A)  adverse opinion. 
B)  unqualified opinion. 
C)  disclaimer of opinion. 
D)  qualified opinion. 
A)  adverse opinion. 
B)  unqualified opinion. 
C)  disclaimer of opinion. 
D)  qualified opinion.

Question 16

Which of the following is not an internal control procedure for the control of cash receipts?

Accepted Answer

A)  Immediate preparation of records of all cash receipts 
B)  Customers should be given written receipts for all monies paid 
C)  All cash should be deposited frequently 
D)  Use of prenumbered checks 
A)  Immediate preparation of records of all cash receipts 
B)  Customers should be given written receipts for all monies paid 
C)  All cash should be deposited frequently 
D)  Use of prenumbered checks

Question 17

In a company's bank reconciliation, an outstanding check is a check that:

Accepted Answer

A)  has been issued by the company but has not been presented to the bank for payment. 
B)  is guaranteed for payment by the bank. 
C)  has been presented to the bank for payment but has not been reported on the bank statement. 
D)  has been written for an amount that is greater than the balance in the account holder's bank account. 
A)  has been issued by the company but has not been presented to the bank for payment. 
B)  is guaranteed for payment by the bank. 
C)  has been presented to the bank for payment but has not been reported on the bank statement. 
D)  has been written for an amount that is greater than the balance in the account holder's bank account.

Question 18

Which of the following is an internal control procedure used to safeguard a company's assets?

Accepted Answer

A)  Timely deposits of cash receipts into a checking account 
B)  Separation of duties 
C)  Reconciliation of the bank statement 
D)  All of these answer choices are correct. 
A)  Timely deposits of cash receipts into a checking account 
B)  Separation of duties 
C)  Reconciliation of the bank statement 
D)  All of these answer choices are correct.

Question 19

Which of the following is not a motive for the embezzlement of cash by employees?

Accepted Answer

A)  Cash is the common unit of measurement. 
B)  Ownership of cash is difficult to prove. 
C)  Cash has universal appeal. 
D)  Small quantities of high denomination can represent significant amounts of value. 
A)  Cash is the common unit of measurement. 
B)  Ownership of cash is difficult to prove. 
C)  Cash has universal appeal. 
D)  Small quantities of high denomination can represent significant amounts of value.

Question 20

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

Accepted Answer

A) True 
 B)False

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

Which of the following is not a component of the fraud triangle?

Which of the following is not a common feature of ethical misconduct?

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

Requiring separation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.

Even a good system of internal controls can be overridden by collusion among employees.

Which of the following is not a primary role of an independent auditor?

In establishing a strong internal control system at Banks Company, management is concerned with administrative controls. Administrative controls include:

Effective internal controls for cash include:

Which of the following statements accurately describes a fidelity bond?

While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee. Which of the following shows the effect of this transaction on the financial statements?

At March 31, Cummins Co. had a balance in its cash account of $10,400. At the end of March the company determined that it had outstanding checks of $900, deposits in transit of $600, a bank service charge of $20, and an NSF check from a customer for $200. The true cash balance at March 31 is:

The most favorable audit opinion that a company can receive is a(n):

Which of the following is not an internal control procedure for the control of cash receipts?

In a company's bank reconciliation, an outstanding check is a check that:

Which of the following is an internal control procedure used to safeguard a company's assets?

Which of the following is not a motive for the embezzlement of cash by employees?

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 4: Internal Controls, Accounting for Cash, and Ethics

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

Which of the following is not a component of the fraud triangle?

Which of the following is not a common feature of ethical misconduct?

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

Requiring separation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.

Even a good system of internal controls can be overridden by collusion among employees.

Which of the following is not a primary role of an independent auditor?

In establishing a strong internal control system at Banks Company, management is concerned with administrative controls. Administrative controls include:

Effective internal controls for cash include:

Which of the following statements accurately describes a fidelity bond?

While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee. Which of the following shows the effect of this transaction on the financial statements?

At March 31, Cummins Co. had a balance in its cash account of $10,400. At the end of March the company determined that it had outstanding checks of $900, deposits in transit of $600, a bank service charge of $20, and an NSF check from a customer for $200. The true cash balance at March 31 is:

The most favorable audit opinion that a company can receive is a(n):

Which of the following is not an internal control procedure for the control of cash receipts?

In a company's bank reconciliation, an outstanding check is a check that:

Which of the following is an internal control procedure used to safeguard a company's assets?

Which of the following is not a motive for the embezzlement of cash by employees?

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters