loader  Loading... Please wait...

Question(s) / Instruction(s):

21. A voucher system is used by many large companies as a means of controlling cash receipts.

22. The petty cash fund eliminates the need for a bank checking account.

23. Cash register overages are deposited in the petty cash fund and cash shortages are made-up from the petty cash fund.

24. A deposit ticket is a negotiable instrument that can be transferred to another party by endorsement.

25. If a company deposits all its receipts in the bank and pays all its bills by check, then the monthly bank statement balance will always agree with the company's record of its checking account balance.

26. Checks from customers who pay their accounts promptly are called outstanding checks.

27. All reconciling items in determining the adjusted cash balance per books require the depositor to make adjusting journal entries to the Cash account.

28. A bank reconciliation is generally prepared by the bank and sent to the depositor along with cancelled checks.

29. Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

30. Cash which is restricted for a specific use should be separately reported.

The following questions are from the Study Guide.

s31. Internal control consists of the plan of organization and all of the related methods and measures adopted within a business to (a) safeguard its assets, and (b) enhance the accuracy and reliability of its accounting records.

s32. In general, documents should be prenumbered and all documents should be accounted for.

s33. Collusion may result when one individual circumvents prescribed controls and may significantly impair the effectiveness of a system.

s34. Personnel who handle cash receipts should have the option of taking a vacation or not.

s35. The duties of approving an item for payment and paying the item should be done by different departments or individuals.

s36. The custodian of the petty cash fund has the responsibility of recording a journal entry every time cash is used from the fund.

s37. A debit memorandum will show the collection of a note receivable by the bank. s38. To obtain maximum benefit from a bank reconciliation, the reconciliation sMULTIPLE CHOICE QUESTIONS 39. Which one of the following is not an objective of a system of internal controls? a. Safeguard company assets b. Overstate liabilities in order to be conservative c. Enhance the accuracy and reliability of accounting records d. Reduce the risks of errors

40. Internal controls are concerned with a. only manual systems of accounting. b. the extent of government regulations. c. safeguarding assets. d. preparing income tax returns.

41. The Foreign Corrupt Practices Act requires that all U. S. corporations under the juris-diction of the Securities and Exchange Commission a. have at least one foreign subsidiary. b. maintain accounting records of foreign branches and subsidiaries in the local foreign currency. c. maintain an adequate system of internal control. d. must file reports with the National Commission on Fraudulent Financial Reporting.

42. Internal control is defined, in part, as a plan that safeguards a. all balance sheet accounts. b. assets. c. liabilities. d. capital stock.

43. The importance of a good system of internal controls was recognized with the passage of a. the Securities and Exchange Act of 1933. b. the Securities and Exchange Act of 1994. c. the Blue Sky Laws. d. the Foreign Corrupt Practices Act of 1977.

44. Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices Act of 1977 a. may do so legally by obtaining an exemption. b. will be automatically dissolved. c. may be subject to fines and officer imprisonment. d. may be forced to sell their foreign subsidiaries.

45. Internal controls are not designed to safeguard assets from a. natural disasters. b. employee theft. c. robbery. d. unauthorized use.

46. Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of a. inadequate internal control. b. duplication of effort. c. external verification. d. segregation of duties.

47. Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them a. increases the potential for errors and fraud. b. decreases the potential for errors and fraud. c. is an example of good internal control. d. is a good example of safeguarding the company's assets.

48. The custodian of a company asset should a. have access to the accounting records for that asset. b. be someone outside the company. c. not have access to the accounting records for that asset. d. be an accountant.

49. Internal auditors a. are hired by CPA firms to audit business firms. b. are employees of the IRS who evaluate the internal controls of companies filing tax returns. c. evaluate the system of internal controls for the companies that employ them. d. cannot evaluate the system of internal controls of the company that employs them because they are not independent.

50. When two or more people get together for the purpose of circumventing prescribed controls, it is called a. a fraud committee. b. collusion. c. a division of duties. d. bonding of employees.

51. From an internal control standpoint, the asset most susceptible to improper diversion and use is a. prepaid insurance. b. cash. c. buildings. d. land.

52. The principle of establishing responsibility does not include a. one person being responsible for one task. b. authorization of transactions. c. independent internal verification. d. approval of transactions.

53. The control principle related to not having the same person authorize and pay for goods is known as a. establishment of responsibility. b. independent internal verification. c. separation of duties. d. rotation of duties.

54. Two individuals at a retail store work the same cash register. You evaluate this situation as a. a violation of establishment of responsibility. b. a violation of separation of duties. c. supporting the establishment of responsibility. d. supporting internal independent verification.

55. An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of a. establishment of responsibility is violated. b. independent internal verification is violated. c. documentation procedures is violated. d. separation of duties is violated.

56. Related selling activities do not include a. ordering the merchandise. b. making a sale. c. shipping the goods. d. billing the customer.

57. Related buying activities include a. ordering, receiving, paying. b. ordering, selling, paying. c. ordering, shipping, billing. d. selling, shipping, paying.

58. Joe is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates a. documentation procedures are violated. b. independent internal verification is violated. c. segregation of duties is violated. d. establishment of responsibility is violated. 59. Physical controls to safeguard assets do not include a. cashier department supervisors. b. vaults. c. employee identification badges. d. security guards.

60. In large companies the independent internal verification procedure is often assigned to a. computer operators. b. management. c. internal auditors. d. outside CPAs. hould be prepared by an employee who has no other responsibilities pertaining to cash.

Find Similar Answers by Subject

Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)

Expert's Answer
Download Solution:

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)

Reach Us