Exam 7: Internal Control

Management is responsible for establishing a satisfactory system of internal control.

Another term for an invoice is a bill.

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

An accountant is responsible for the following activities: (1) receiving all cash; (2) maintaining the general ledger; (3) maintaining the accounts receivable subsidiary ledger that includes the individual records of each customer; (4) maintaining the journals for recording sales, purchases, and cash receipts; and (5) preparing monthly statements to be sent to customers. As a service to customers and employees, the company allows the accountant to cash checks of up to $75 with money from the cash receipts. When deposits are made, the checks are included in place of the cash receipts. What weaknesses in internal control exist in this system?

Under the perpetual inventory system, the entry to recognize inventory losses would contain a

A traditional definition of internal control specifically includes all of the following features, except

Under an effective system of internal control, errors occur only as a result of fraud or dishonesty.

The use of a cash register would be an example of a physical control.

Cash received through the mail need be handled by only one employee to achieve effective internal control.

Before a check authorization is issued, the following documents must be in agreement, except for the

The Sarbanes-Oxley Act of 2002 does not require any certification from a public company's chief executive officer about the company's system of internal control.

A company establishes a $150 petty cash fund. The fund is replenished in the amount of $136, after petty cash vouchers of $66 for transportation, $44 for supplies, and $22 for postage had accumulated. Was there a cash shortage, overage, or neither? (State amount if overage or shortage.)

Internal control involves, in part, the protection of a company's assets.

To assure an efficient system of internal control, management should authorize all transactions.

Which of the following documents is mailed to the vendor (seller) of goods?

Effective internal control requires a department to purchase supplies on its own.

Which of the following documents remains with the originating company in a purchase transaction?

Management's regular assessment of its internal controls is called risk assessment.

In addition to keeping the records of a purchase transaction, the accounting department should prepare and mail checks in payment of invoices.

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