Question 1

Russel Company assembled the following information in completing its March bank reconciliation: $$\begin{array} { l r } 
\text { Balance per bank } & \$ 19,100 \
\text { Outstanding checks } & \$ 3,875 \
\text { Deposits in transit } & \$ 6,250 \
\text { NSF check } & \$ 400 \
\text { Bank service charges } & \$ 125 \
\text { Cash balance per books } & \$ 22,000
\end{array}$$ As a result of this reconciliation Russel will

Accepted Answer

A) reduce its cash account by $2375. 
B) reduce its cash account by $125. 
C) increase its cash account by $275. 
D) reduce its cash account by $525.

Question 2

An exception to disbursements being made by check is acceptable when cash is paid

Accepted Answer

A) to an owner. 
B) to employees as wages. 
C) from petty cash. 
D) to employees as loans.

Question 3

An effective system of internal control centralizes functions in a single capable individual.

Accepted Answer

A) True 
 B)False

Question 4

If a monthly cash budget is prepared properly there will never be a cash deficiency at the end of any month.

Accepted Answer

A) True 
 B)False

Question 5

Collier Company has implemented a just-in-time system which relies on suppliers to deliver goods for resale as needed.This implementation is most consistent with which of the following basic principles of cash management?

Accepted Answer

A) Increasing the speed of receivables collection. 
B) Planning the timing of major expenditures. 
C) Keeping inventory levels low. 
D) Delaying the payment of liabilities.

Question 6

Internal auditors are independent contractors who evaluate the effectiveness of a company's internal control systems.

Accepted Answer

A) True 
 B)False

Question 7

The responsibility for ordering receiving and paying for merchandise should be assigned to different individuals.

Accepted Answer

A) True 
 B)False

Question 8

Physical controls to safeguard assets do not include

Accepted Answer

A) cashier department supervisors. 
B) vaults. 
C) safety deposit boxes. 
D) locked warehouses.

Question 9

Lackey Company wrote checks totaling $38430 during October (its first month of operations) and $41964 during November.$36540 of these checks cleared the bank in October and $40995 cleared the bank in November.What was the amount of outstanding checks on November 30?

Accepted Answer

A) $2859. 
B) $519. 
C) $1374. 
D) $4455.

Question 10

A bank reconciliation should be prepared

Accepted Answer

A) whenever the bank refuses to lend the company money. 
B) when an employee is suspected of fraud. 
C) to explain any difference between the depositor's balance per books with the balance per bank. 
D) by the person who is authorized to sign checks.

Question 11

Ron Jones has been a trusted employee for over 10 years.He is responsible for ordering merchandise inventory receiving the inventory items and authorizing the payment for these items.Which internal control principle if any is being violated?

Accepted Answer

A) None Ron has proven to be trustworthy and has enough experience to do a good job. 
B) Documentation procedures. 
C) Establishment of responsibilities. 
D) Segregation of duties.

Question 12

Which statement regarding negative cash balances is true?

Accepted Answer

A) The amount is offset against other current assets because users need to know net current assets. 
B) The amount is shown as a current liability because a company cannot have a cash balance below zero. 
C) The company must obtain a loan to bring the cash balance to zero before financial statements are prepared. 
D) The negative cash balance is included as a current asset and discussed in a footnote to the financial statements.

Question 13

All of the following bank reconciliation items would result in an adjustment on the company's books except

Accepted Answer

A) interest earned. 
B) deposits in transit. 
C) fee for collection of note by bank. 
D) NSF check of customer.

Question 14

Which one of the following sections would not appear on a cash budget?

Accepted Answer

A) Cash receipts. 
B) Financing. 
C) Investing. 
D) Cash disbursements.

Question 15

A check written by the company for $167 is incorrectly recorded by a company as $176.On the bank reconciliation the $9 error should be

Accepted Answer

A) added to the balance per books. 
B) deducted from the balance per books. 
C) added to the balance per bank. 
D) deducted from the balance per bank.

Question 16

All of the following are examples of internal control procedures except

Accepted Answer

A) using prenumbered documents. 
B) reconciling the bank statement. 
C) customer satisfaction surveys. 
D) insistence that employees take vacations.

Question 17

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjustment:

Accepted Answer

A) Increase Accounts Receivable Decrease Cash 
B) Increase Cash Decrease Accounts Receivable 
C) Increase Miscellaneous Expense Decrease Accounts Receivable 
D) No adjustment is necessary.

Question 18

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act except

Accepted Answer

A) independent outside auditors must attest to the level of internal control. 
B) companies must develop sound internal controls over financial reporting. 
C) companies must continually assess the functionality of internal controls. 
D) independent outside auditors must eliminate redundant internal controls.

Question 19

A cash budget contributes to more effective cash management.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 5: Fraud, Internal Control, and Cash

An exception to disbursements being made by check is acceptable when cash is paid

An effective system of internal control centralizes functions in a single capable individual.

If a monthly cash budget is prepared properly there will never be a cash deficiency at the end of any month.

Collier Company has implemented a just-in-time system which relies on suppliers to deliver goods for resale as needed.This implementation is most consistent with which of the following basic principles of cash management?

Internal auditors are independent contractors who evaluate the effectiveness of a company's internal control systems.

The responsibility for ordering receiving and paying for merchandise should be assigned to different individuals.

Physical controls to safeguard assets do not include

Lackey Company wrote checks totaling $38430 during October (its first month of operations) and $41964 during November.$36540 of these checks cleared the bank in October and $40995 cleared the bank in November.What was the amount of outstanding checks on November 30?

A bank reconciliation should be prepared

Ron Jones has been a trusted employee for over 10 years.He is responsible for ordering merchandise inventory receiving the inventory items and authorizing the payment for these items.Which internal control principle if any is being violated?

Which statement regarding negative cash balances is true?

All of the following bank reconciliation items would result in an adjustment on the company's books except

Which one of the following sections would not appear on a cash budget?

A check written by the company for $167 is incorrectly recorded by a company as $176.On the bank reconciliation the $9 error should be

All of the following are examples of internal control procedures except

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjustment:

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act except

A cash budget contributes to more effective cash management.

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