Question 1

The "tone at the top":

Accepted Answer

A)   is a component of the control procedures.
B)   starts with low level employees.
C)   means that owners and top managers must behave honorably to set a good example for employees.
D)   is set by the PCAOB.E) B) and C)
F) B) and D)

Question 2

A malicious program that enters program code without consent and performs destructive actions in the victim's computer files or programs is a(n) :

Accepted Answer

A)   encryption device.
B)   phishing expedition.
C)   computer virus.
D)   Trojan horse.E) B) and C)
F) None of the above

Question 3

Interest paid on a company's checking account should appear on the bank reconciliation as:

Accepted Answer

A)   added to the bank balance.
B)   added to the book balance.
C)   deducted from the book balance.
D)   having no impact on the book balance.E) C) and D)
F) A) and B) B

Question 4

Collusion is the method widely used to defeat the adequate segregation of duties.

Accepted Answer

A) True 
 B)False

Question 5

Cash requires specific internal controls because:

Accepted Answer

A)   cash is one of the most difficult assets to steal.
B)   cash is difficult to convert to other forms of wealth.
C)   all transactions ultimately affect cash.
D)   cash is difficult to conceal.E) A) and C)
F) A) and D)

Question 6

Payments by check is an important internal control for all of the following reasons EXCEPT for:

Accepted Answer

A)   the checks provided a record of the payment.
B)   the check must be signed by an authorized official.
C)   all payments are made via a lock-box system.
D)   before signing the check, the authorized official should study the evidence supporting the payment.E) A) and B)
F) A) and C)

Question 7

Outstanding checks are checks that have been recorded by the bank, but are not yet recorded on the books.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would NOT be journalized from the bank reconciliation?

Accepted Answer

A)   Outstanding checks
B)   Interest income collected by the bank
C)   Book errors
D)   Charge for printing of checks and deposit slipsE) C) and D)
F) A) and D)

Question 9

The primary way that fraud is prevented and detected is through a proper system of:

Accepted Answer

A)   checks and balances.
B)   management directives.
C)   internal control.
D)   internal and external audits.E) B) and D)
F) C) and D)

Question 10

The bank reconciliation can be used to control cash.

Accepted Answer

A) True 
 B)False

Question 11

A business can have their customers pay directly to the bank. This is a(n)  ________ system and can reduce theft.

Accepted Answer

A)   direct
B)   receivable
C)   lock-box
D)   imprestE) A) and D)
F) B) and C)

Question 12

The primary way that fraud and errors are prevented is by external auditors.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an accurate statement regarding cash receipts over the counter?

Accepted Answer

A)   The point-of-sale terminal electronically transmits a record of the sale to the store's main computer.
B)   Employees should take the deposit to the bank.
C)   The cashier should reconcile the electronic record of the sales per the terminal to the record of cash received.
D)   Point-of-sale terminals cannot assist in inventory control.E) A) and D)
F) A) and C) A

Question 14

Cash equivalents include all of the following EXCEPT:

Accepted Answer

A)   time deposits.
B)   high-grade government securities.
C)   certificates of deposit.
D)   stocks and bonds.E) A) and B)
F) B) and D)

Question 15

Three key duties must always be separated under a good system of internal controls:

Accepted Answer

A)   asset handling, record keeping and transaction approval.
B)   asset handling, hiring and safeguarding of assets.
C)   asset handling, recordkeeping and safeguarding of assets.
D)   record keeping, transaction analysis and transaction approval.E) A) and C)
F) B) and D)

Question 16

In a bank reconciliation, items recorded by the bank, but not yet recorded by the company, include:

Accepted Answer

A)   deposits in transit.
B)   bank collections.
C)   outstanding checks.
D)   both deposits in transit and outstanding checks.E) B) and C)
F) All of the above B

Question 17

In a bank reconciliation, a NSF check is:

Accepted Answer

A)   added to the bank balance.
B)   added to the book balance.
C)   deducted from the book balance.
D)   deducted from the bank balance.E) None of the above
F) B) and C)

Question 18

Smart hiring practices and separation of duties includes:

Accepted Answer

A)   background checks only on top-level management.
B)   vague job position descriptions.
C)   payment of competitive salaries
D)   the preparation of operating budgets.E) B) and C)
F) A) and B)

Question 19

When a company receives cash by mail:

Accepted Answer

A)   all incoming mail containing cash receipts should be opened by the accounting department.
B)   the mailroom sends all customer checks to the internal audit department.
C)   the remittance advice goes to the accounting department for preparation of the journal entries.
D)   the bank deposit is prepared by the mail room.E) All of the above
F) B) and D)

Question 20

The basic attributes of internal control are the same for a sophisticated IT system and a manual system.

Accepted Answer

A) True 
 B)False

Exam 4: Internal Control Cash

The "tone at the top":

Correct AnswerverifiedShow Answer

A malicious program that enters program code without consent and performs destructive actions in the victim's computer files or programs is a(n) :

Correct AnswerverifiedShow Answer

Interest paid on a company's checking account should appear on the bank reconciliation as:

Correct AnswerverifiedB

Collusion is the method widely used to defeat the adequate segregation of duties.

Correct AnswerverifiedShow Answer

Cash requires specific internal controls because:

Correct AnswerverifiedShow Answer

Payments by check is an important internal control for all of the following reasons EXCEPT for:

Correct AnswerverifiedShow Answer

Outstanding checks are checks that have been recorded by the bank, but are not yet recorded on the books.

Correct AnswerverifiedShow Answer

Which of the following would NOT be journalized from the bank reconciliation?

Correct AnswerverifiedShow Answer

The primary way that fraud is prevented and detected is through a proper system of:

Correct AnswerverifiedShow Answer

The bank reconciliation can be used to control cash.

Correct AnswerverifiedShow Answer

A business can have their customers pay directly to the bank. This is a(n) ________ system and can reduce theft.

Correct AnswerverifiedShow Answer

The primary way that fraud and errors are prevented is by external auditors.

Correct AnswerverifiedShow Answer

Which of the following is an accurate statement regarding cash receipts over the counter?

Correct AnswerverifiedA

Cash equivalents include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Three key duties must always be separated under a good system of internal controls:

Correct AnswerverifiedShow Answer

In a bank reconciliation, items recorded by the bank, but not yet recorded by the company, include:

Correct AnswerverifiedB

In a bank reconciliation, a NSF check is:

Correct AnswerverifiedShow Answer

Smart hiring practices and separation of duties includes:

Correct AnswerverifiedShow Answer

When a company receives cash by mail:

Correct AnswerverifiedShow Answer

The basic attributes of internal control are the same for a sophisticated IT system and a manual system.

Correct AnswerverifiedShow Answer

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B

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A

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B

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