Question 1

To have a strong internal control system,a business must have good administrative controls.Administrative controls include:

Accepted Answer

A)   the reconciliation of the bank statement.
B)   the accuracy of the recording procedures.
C)   assessing compliance with company policies.
D)   maintenance of accurate inventory records. C

Question 2

A financial statement audit is

Accepted Answer

A)   a detailed examination of a company's financial statements
B)   tests the reliability of the accounting system used to produce the financial statements
C)   conducted by an independent auditor
D)   all of the above D

Question 3

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

Accepted Answer

A) True 
 B)False  True

Question 4

The following information pertains to the bank reconciliation of January 31,2012 for the Beckett Company:  In addition,the reconciliation revealed one error: Check #2146 for $95 was incorrectly recorded in the books for $59.
Using the above information,compute the unadjusted book balance.

Accepted Answer

The answer of The following information pertains to the bank...

Question 5

What were the events that led Congress to pass the Sarbanes-Oxley Act of 2002?

Accepted Answer

The answer of What were the events that led Congress...

Question 6

In preparing bank reconciliations,typical adjustments to the book balance include

Accepted Answer

A)   outstanding checks.
B)   correction of an error made by the bank.
C)   interest earned on the checking account.
D)   deposits in transit.

Question 7

Which of the following is not one of the purposes of an internal control system?

Accepted Answer

A)   Safeguarding the company's assets
B)   Ensuring that the company is using the most effective marketing plan
C)   The assessment of the degree of compliance with company policies and public laws
D)   The evaluation of performance

Question 8

Moreland Ltd.Reported net sales of $10 million and net income of $3 million in 2012.Based on this information,which of the following is an example of a material misstatement on Moreland's 2012 financial statements?

Accepted Answer

A)   Sales equal to $100,000 were recorded before goods were shipped to the customers.
B)   Raw materials purchases of $500,000 were received before yearend but remain unaccrued pending receipt of the vendors' invoices.
C)   The inventory account included $125,000 worth of obsolete inventory.
D)   All of the above

Question 9

While reconciling Snyder Company's bank statement an error was discovered.A $905 cash receipt for the collection of an account receivable was recorded in the company's books as $950.The deposit slip was correct; the error appeared only in the company's accounting records.

Accepted Answer

The answer of While reconciling Snyder Company's bank statement an...

Question 10

While performing the monthly bank reconciliation,the bookkeeper for Rathbun Pool Supply Company made the journal entry for a bank service charge of $49.Which of the following correctly shows the effect of the entry on the financial statements?

Accepted Answer

A)   Choice A
B)   Choice B
C)   Choice C
D)   Choice D

Question 11

Which of the following statements concerning internal controls is true?

Accepted Answer

A)   Internal administrative controls are designed to limit the amount of funds spent on investments.
B)   The control procedure,separation of duties,prohibits the employment of a husband and wife or other closely related parties within the same company.
C)   Internal accounting controls are limited to the policies and procedures used to protect the company from embezzlement.
D)   A strong internal control system provides reasonable assurance that the objectives of a company will be accomplished.

Question 12

At March 31,Bandstra Co.had a book balance in its cash account of $5,500.At the end of March the company determined that it had outstanding checks of $900,deposits in transit of $600,a bank service charge of $20,and an NSF check from a customer for $280.The true cash balance at March 31 is:

Accepted Answer

A)   $5,200
B)   $5,220
C)   $5,500
D)   $4,980

Question 13

An effective system of internal control is designed to detect the following except for:

Accepted Answer

A)   collusion
B)   fraud
C)   theft
D)   irregularities

Question 14

List the internal control procedures that a company should adopt to protect its cash receipts.

Accepted Answer

The answer of List the internal control procedures that a...

Question 15

Link's entry to record the NSF check will

Accepted Answer

A)   increase the Accounts Receivable account.
B)   decrease the Cash account.
C)   not affect the total amount of assets.
D)   all of these.

Question 16

Explain how "separation of duties" can be used as a deterrent to corruption.

Accepted Answer

The answer of Explain how "separation of duties" can be...

Question 17

What is a fidelity bond,and what is its purpose?

Accepted Answer

The answer of What is a fidelity bond,and what is...

Question 18

Osborn Company's unadjusted book balance at June 30,2012 is $7,800.The company's bank statement reveals bank service charges of $45.Two credit memos are included in the bank statement: one for $900 which represents a collection of an account receivable that the bank made for Osborn and one for $10 which represents the amount of interest that Osborn had earned on its interest-bearing checking account in June.Based on this information,Osborn's true cash balance is:

Accepted Answer

A)   $7,800.
B)   $8,705.
C)   $8,665.
D)   $8,795.

Question 19

A good system of internal controls cannot be overridden by collusion among employees.

Accepted Answer

A) True 
 B)False

Question 20

How is a business's certified check treated in doing the business's bank reconciliation?

Accepted Answer

A)   It is added to the bank balance.
B)   It is subtracted from the book balance.
C)   It is subtracted from the bank balance.
D)   It is not included in doing the bank reconciliation.

Exam 4: Internal Controls,accounting for Cash,and Ethics