Question 1

Which of the following is not a goal of a system of internal control over merchandising transactions?

Accepted Answer

A)  Keep credit losses as low as possible. 
B)  Prevent the theft of cash and inventory. 
C)  Keep the maximum amount of inventory on hand at all times. 
D)  Keep enough cash on hand to take advantage of purchase discounts. 
A)  Keep credit losses as low as possible. 
B)  Prevent the theft of cash and inventory. 
C)  Keep the maximum amount of inventory on hand at all times. 
D)  Keep enough cash on hand to take advantage of purchase discounts.

Question 2

A consequence of a separation of duties is that

Accepted Answer

A)  operations become extremely inefficient because of constant training of employees. 
B)  more employees will need to be bonded. 
C)  theft by employees becomes impossible. 
D)  theft is possible only when several employees are involved. 
A)  operations become extremely inefficient because of constant training of employees. 
B)  more employees will need to be bonded. 
C)  theft by employees becomes impossible. 
D)  theft is possible only when several employees are involved.

Question 3

A check authorization is a document that permits the issuance of a check to pay an invoice.

Accepted Answer

A) True 
 B)False

Question 4

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control, except for the

Accepted Answer

A)  chief financial officer. 
B)  auditors. 
C)  stockholders. 
D)  chief executive officer. 
A)  chief financial officer. 
B)  auditors. 
C)  stockholders. 
D)  chief executive officer.

Question 5

Which of the following documents would not originate with the purchasing company?

Accepted Answer

A)  Purchase order 
B)  Receiving report 
C)  Check 
D)  Invoice 
A)  Purchase order 
B)  Receiving report 
C)  Check 
D)  Invoice

Question 6

A company establishes a $100 petty cash fund. The fund is replenished in the amount of $90, after petty cash vouchers of $40 for postage, $34 for donations, and $27 for meals had accumulated. Was there a cash shortage, overage, or neither? (State amount if overage or shortage.)

Accepted Answer

The answer of A company establishes a $100 petty cash...

Question 7

Each of the following is a feature of internal control, except

Accepted Answer

A)  recording of all transactions. 
B)  a sound marketing plan. 
C)  sound personnel policies. 
D)  separation of duties. 
A)  recording of all transactions. 
B)  a sound marketing plan. 
C)  sound personnel policies. 
D)  separation of duties.

Question 8

An understated ending inventory will produce an understated cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an appropriate internal control activity for cash?

Accepted Answer

A)  Recordkeeping and custodianship over cash should be performed by the same person. 
B)  The amount of cash on hand should be kept to a minimum. 
C)  Banking facilities should be used as little as possible. 
D)  All payments should be made with currency, not checks. 
A)  Recordkeeping and custodianship over cash should be performed by the same person. 
B)  The amount of cash on hand should be kept to a minimum. 
C)  Banking facilities should be used as little as possible. 
D)  All payments should be made with currency, not checks.

Question 10

A very small company would have the most difficulty in implementing which of the following internal control activities?

Accepted Answer

A)  Sound personnel procedures 
B)  Periodic independent verification 
C)  Limited access to assets 
D)  Separation of duties 
A)  Sound personnel procedures 
B)  Periodic independent verification 
C)  Limited access to assets 
D)  Separation of duties

Question 11

When payment is received by mail, a detailed list of such receipts would not be retained by the

Accepted Answer

A)  receiving department. 
B)  accounting department. 
C)  person who opens the mail. 
D)  cashier. 
A)  receiving department. 
B)  accounting department. 
C)  person who opens the mail. 
D)  cashier.

Question 12

Which of the following documents is prepared by a company's accounting department?

Accepted Answer

A)  Bank statement 
B)  Receiving report 
C)  Check authorization 
D)  Invoice 
A)  Bank statement 
B)  Receiving report 
C)  Check authorization 
D)  Invoice

Question 13

In a purchase system, the most appropriate department to control goods upon arrival at the company is the

Accepted Answer

A)  accounting department. 
B)  receiving department. 
C)  treasury department. 
D)  requesting department. 
A)  accounting department. 
B)  receiving department. 
C)  treasury department. 
D)  requesting department.

Question 14

A system of internal control cannot be considered good until the possibility of human error has been completely eliminated.

Accepted Answer

A) True 
 B)False

Question 15

All systems of internal control are identical, and once established, do not need to be changed.

Accepted Answer

A) True 
 B)False

Question 16

The bonding of employees is an example of which feature of a good system of internal control?

Accepted Answer

A)  Authorization of transactions 
B)  Sound personnel policies 
C)  Separation of duties 
D)  Limited access to assets 
A)  Authorization of transactions 
B)  Sound personnel policies 
C)  Separation of duties 
D)  Limited access to assets

Question 17

The review of a system of internal control by internal auditors relates most closely to the monitoring component of internal control.

Accepted Answer

A) True 
 B)False

Question 18

The amount in the petty cash fund plus the sum of the petty cash vouchers should at all times equal the amount shown in the Petty Cash account.

Accepted Answer

A) True 
 B)False

Question 19

When a petty cash fund is established, the entry contains a debit to Cash.

Accepted Answer

A) True 
 B)False

Question 20

Good internal control dictates that each employee should oversee only part of a transaction.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control

Which of the following is not a goal of a system of internal control over merchandising transactions?

A consequence of a separation of duties is that

A check authorization is a document that permits the issuance of a check to pay an invoice.

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control, except for the

Which of the following documents would not originate with the purchasing company?

A company establishes a $100 petty cash fund. The fund is replenished in the amount of $90, after petty cash vouchers of $40 for postage, $34 for donations, and $27 for meals had accumulated. Was there a cash shortage, overage, or neither? (State amount if overage or shortage.)

Each of the following is a feature of internal control, except

An understated ending inventory will produce an understated cost of goods sold.

Which of the following is an appropriate internal control activity for cash?

A very small company would have the most difficulty in implementing which of the following internal control activities?

When payment is received by mail, a detailed list of such receipts would not be retained by the

Which of the following documents is prepared by a company's accounting department?

In a purchase system, the most appropriate department to control goods upon arrival at the company is the

A system of internal control cannot be considered good until the possibility of human error has been completely eliminated.

All systems of internal control are identical, and once established, do not need to be changed.

The bonding of employees is an example of which feature of a good system of internal control?

The review of a system of internal control by internal auditors relates most closely to the monitoring component of internal control.

The amount in the petty cash fund plus the sum of the petty cash vouchers should at all times equal the amount shown in the Petty Cash account.

When a petty cash fund is established, the entry contains a debit to Cash.

Good internal control dictates that each employee should oversee only part of a transaction.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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