Question 1

In a small business, because it is often cost-prohibitive to hire extra employees, the lack of certain separations of duties can best be overcome by

Accepted Answer

A)  bonding the employees. 
B)  getting the owner actively involved. 
C)  hiring only honest employees. 
D)  holding one person responsible for a given set of transactions. 
A)  bonding the employees. 
B)  getting the owner actively involved. 
C)  hiring only honest employees. 
D)  holding one person responsible for a given set of transactions.

Question 2

A company's merchandise inventory includes all of the following, except

Accepted Answer

A)  goods in possession, but which cannot be sold. 
B)  goods on shelves. 
C)  damaged goods that can be sold at a reduced price. 
D)  goods in storerooms. 
A)  goods in possession, but which cannot be sold. 
B)  goods on shelves. 
C)  damaged goods that can be sold at a reduced price. 
D)  goods in storerooms.

Question 3

Bonding means insuring a company against loss due to employee theft.

Accepted Answer

A) True 
 B)False

Question 4

The petty cash voucher should be kept by the person being reimbursed.

Accepted Answer

A) True 
 B)False

Question 5

An effective system of internal control requires that individuals take periodic vacations.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  management planning. 
B)  periodic independent verification. 
C)  limited access to assets. 
D)  authorization of transactions. 
A)  management planning. 
B)  periodic independent verification. 
C)  limited access to assets. 
D)  authorization of transactions.

Question 7

A $100 petty cash fund has cash of $14 and valid receipts for $75. The entry to replenish the fund would include a

Accepted Answer

The answer of A $100 petty cash fund has cash...

Question 8

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

Accepted Answer

A)  The amount of cash on hand should be kept to a minimum. 
B)  Banking facilities should be used as much as possible. 
C)  Employees who have access to cash should be bonded. 
D)  All payments should be made with currency, not checks. 
A)  The amount of cash on hand should be kept to a minimum. 
B)  Banking facilities should be used as much as possible. 
C)  Employees who have access to cash should be bonded. 
D)  All payments should be made with currency, not checks.

Question 9

A purchase order would be prepared after a purchase requisition.

Accepted Answer

A) True 
 B)False

Question 10

The financial statements of nonpublic companies are not required to be audited by an independent CPA.

Accepted Answer

A) True 
 B)False

Question 11

The document prepared by a department requesting the company to buy something is called a(n)

Accepted Answer

A)  purchase order. 
B)  invoice. 
C)  receiving report. 
D)  purchase requisition. 
A)  purchase order. 
B)  invoice. 
C)  receiving report. 
D)  purchase requisition.

Question 12

A $200 petty cash fund has cash of $20 and valid receipts of $164. The entry to replenish the fund would be

Accepted Answer

The answer of A $200 petty cash fund has cash...

Question 13

A purchase order is sent from a company's

Accepted Answer

A)  purchasing department to the supplier. 
B)  requesting department to the supplier. 
C)  requesting department to its accounting department. 
D)  treasurer to the supplier. 
A)  purchasing department to the supplier. 
B)  requesting department to the supplier. 
C)  requesting department to its accounting department. 
D)  treasurer to the supplier.

Question 14

Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's system of internal control.
_____
a. Discouraging employees from taking paid vacations
_____
b. Using banking facilities as much as possible
_____
c. Having employees bonded
_____
d. Conducting surprise audits of cash on hand
_____
e. Having one person open the mail
_____
_____ f. Having the receiving department compare goods received with goods ordered

Accepted Answer

a. W
b. S

Question 15

The separation of duties is easier to accomplish in small companies than in large ones.

Accepted Answer

A) True 
 B)False

Question 16

In a small business, active involvement by the owner can be a practical substitute for the separation of some duties.

Accepted Answer

A) True 
 B)False

Question 17

Management's authorization of transactions relates to a control activity in the accounting system.

Accepted Answer

A) True 
 B)False

Question 18

The Report of Management in Townsgate Company's annual report states, "Management has established a system of internal controls to provide reasonable assurance that assets are maintained and accounted for in accordance with its policies and that transactions are recorded accurately on the company's books and records." Name five control activities Townsgate could and probably does implement.

Accepted Answer

Any of the following control activities

Question 19

At the end of each day, the cashier should be the one responsible for comparing the amount on the cash register tape with the day's cash additions to the cash register.

Accepted Answer

A) True 
 B)False

Question 20

A remittance advice would be attached to a check authorization.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control

In a small business, because it is often cost-prohibitive to hire extra employees, the lack of certain separations of duties can best be overcome by

A company's merchandise inventory includes all of the following, except

Bonding means insuring a company against loss due to employee theft.

The petty cash voucher should be kept by the person being reimbursed.

An effective system of internal control requires that individuals take periodic vacations.

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

A $100 petty cash fund has cash of $14 and valid receipts for $75. The entry to replenish the fund would include a

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

A purchase order would be prepared after a purchase requisition.

The financial statements of nonpublic companies are not required to be audited by an independent CPA.

The document prepared by a department requesting the company to buy something is called a(n)

A $200 petty cash fund has cash of $20 and valid receipts of $164. The entry to replenish the fund would be

A purchase order is sent from a company's

The separation of duties is easier to accomplish in small companies than in large ones.

In a small business, active involvement by the owner can be a practical substitute for the separation of some duties.

Management's authorization of transactions relates to a control activity in the accounting system.

At the end of each day, the cashier should be the one responsible for comparing the amount on the cash register tape with the day's cash additions to the cash register.

A remittance advice would be attached to a check authorization.

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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