Question 1

If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary.

Accepted Answer

A) True 
 B)False

Question 2

The establishment of a petty cash fund has no effect on the company's total cash balance.

Accepted Answer

A) True 
 B)False

Question 3

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Clearly defined authority and responsibility

Accepted Answer

A) One employee or department should verify the work of another. 
B) Specific approval is given by management for the performance of activities. 
C) Accounting and cash collections should be properly separated. 
D) Blank checks should be stored in a locked location. 
E) Initial entry into the accounting system should be from a consistent source with complete information.

Question 4

Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.

Accepted Answer

The answer of Explain some internal control procedures that a...

Question 5

How are cash equivalents reported or disclosed in the financial statements?

Accepted Answer

A) They are included with cash as a current asset on the balance sheet. 
B) They are only reported on the statement of cash flows. 
C) They are only disclosed in the notes to the financial statements. 
D) They are included with short-term investments as a current asset on the balance sheet.

Question 6

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Adequate documents and records

Accepted Answer

A) One employee or department should verify the work of another. 
B) Specific approval is given by management for the performance of activities. 
C) Accounting and cash collections should be properly separated. 
D) Blank checks should be stored in a locked location. 
E) Initial entry into the accounting system should be from a consistent source with complete information.

Question 7

Each of the following represents an effective cash management practice except

Accepted Answer

A) short-term investments should be purchased with excess cash in order to maximize the interest-earning potential. 
B) payments should be delayed as long as possible (without compromising the relationship with the payee) in order to maximize the interest-earning potential. 
C) payments should be expedited in order to simplify record keeping. 
D) receivable collections should be expedited or receivables should be sold in order to minimize the costs associated with accounting for customer accounts and servicing delinquent accounts.

Question 8

Match the following terms with their correct definitions.
-Possible external threats to the organization's success in accomplishing its goals

Accepted Answer

A) Accounting system 
B) Business process risks 
C) Control activities 
D) Control environment 
E) Internal control system
F)Safeguarding
G)Segregation of duties
H)Strategic risks

Question 9

Match the following terms with their correct definition.
-A bank reconciling item that must be subtracted from the unadjusted book balance when preparing a bank reconciliation

Accepted Answer

A) Bank reconciliation 
B) Deposit in transit 
C) Non-sufficient funds check 
D) Outstanding check 
E) Service charges

Question 10

A company's records indicate the balance in its checking account at the end of the month is $3,918. Comparing the company's records with the monthly bank statement reveals several additional cash transactions, such as deposits in transit of $4,022, three outstanding checks totaling $497, a $30 bank service charge, a $1,000 note receivable collected by the bank plus interest earned of $35, and an NSF check for $150. Determine the company's adjusted cash balance and prepare the journal entries necessary to adjust the account balance.

Accepted Answer

The answer of A company's records indicate the balance in...

Question 11

Strategic risk assessment is designed to identify, analyze, and manage possible threats to the organization's success concerning ____________________ forces such as competitors, customers, suppliers, and PEST factors.

Accepted Answer

The answer of Strategic risk assessment is designed to identify,...

Question 12

When there is proper segregation of duties, the likelihood of fraud is reduced so that an employee attempting to carry out a fraudulent scheme would have to work in ____________________ with another employee.

Accepted Answer

The answer of When there is proper segregation of duties,...

Question 13

Which of the following is an example of a debit memo?

Accepted Answer

A) notice of a bank service charge 
B) notice of interest earned on a checking account 
C) outstanding checks 
D) a company's transposition error in the recording of a deposit

Question 14

Under the ____________________ Act, management of publicly-traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements.

Accepted Answer

The answer of Under the ____________________ Act, management of publicly-traded...

Question 15

If the balance on the bank statement does not equal the balance per the company's records, then it can be assumed that

Accepted Answer

A) the company has no errors in its records concerning the cash account. 
B) the bank has made errors in preparing the bank statement. 
C) the company has made errors in its records concerning the cash account. 
D) there will be items reconciling the difference.

Question 16

On a bank reconciliation, outstanding checks are added to the cash balance per the bank statement.

Accepted Answer

A) True 
 B)False

Question 17

The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.)
-An accounting department employee records cash receipts from customers and prepares the bank deposit slips.

Accepted Answer

A) Adheres to sound internal controls 
B) Violates sound internal controls 
C) Neither strengthens nor violates internal control

Question 18

Effective cash management and control for a company's operating cycle includes all of the following except

Accepted Answer

A) the use of a petty cash fund. 
B) the preparation of monthly bank reconciliations. 
C) the practice of using surplus cash for the purchase of bonds or other long-term investments. 
D) the practice of keeping inventory levels low.

Question 19

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Checks on recorded amounts

Accepted Answer

A) One employee or department should verify the work of another. 
B) Specific approval is given by management for the performance of activities. 
C) Accounting and cash collections should be properly separated. 
D) Blank checks should be stored in a locked location. 
E) Initial entry into the accounting system should be from a consistent source with complete information.

Question 20

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

Accepted Answer

A) debit memos. 
B) credit memos. 
C) outstanding checks. 
D) deposits in transit.

Exam 4: Internal Control And Cash

If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary.

The establishment of a petty cash fund has no effect on the company's total cash balance.

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Clearly defined authority and responsibility

Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.

How are cash equivalents reported or disclosed in the financial statements?

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Adequate documents and records

Each of the following represents an effective cash management practice except

Match the following terms with their correct definitions. -Possible external threats to the organization's success in accomplishing its goals

Match the following terms with their correct definition. -A bank reconciling item that must be subtracted from the unadjusted book balance when preparing a bank reconciliation

Strategic risk assessment is designed to identify, analyze, and manage possible threats to the organization's success concerning ____________________ forces such as competitors, customers, suppliers, and PEST factors.

When there is proper segregation of duties, the likelihood of fraud is reduced so that an employee attempting to carry out a fraudulent scheme would have to work in ____________________ with another employee.

Which of the following is an example of a debit memo?

Under the ____________________ Act, management of publicly-traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements.

If the balance on the bank statement does not equal the balance per the company's records, then it can be assumed that

On a bank reconciliation, outstanding checks are added to the cash balance per the bank statement.

Effective cash management and control for a company's operating cycle includes all of the following except

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Checks on recorded amounts

Cash collected and recorded by a company but not yet reflected in a bank statement are known as