Strayer ACC557 Week 6 Chapter 7, 8 Quiz

ACC 557 WK 6 Chapter 7, 8 QuizTRUE-FALSE STATEMENTS 1. Internal control is mainly concerned with the amount of authority a supervisor exercises over a subordinate. 2. A highly automated computerized system of accounting eliminates the need for internal control. 3. The safeguarding of assets is an objective of a company’s system of internal control. 4. Management is responsible for establishing a system of internal control. 5. Internal control is most effective when several people are responsible for a given task. 6. The responsibility for keeping the records for an asset should be separate from the physical custody of that asset. 7. Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency. 8. The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit. 9. An effective system of internal control requires that at least two individuals be assigned to one cash drawer so that each can serve as check on the other. 10. Only large companies need to be concerned with a system of internal control. 11. The responsibility for ordering, receiving, and paying for merchandise should be assigned to different individuals. 12. In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry. 13. Firms use physical controls primarily to safeguard their assets. 14. A segregation of duties among employees eliminates the possibility of collusion. 15. For efficiency of operations and better control over cash, a company should maintain only one bank account. 16. Cash registers are an important internal control device used in controlling over-the-counter receipts. 17. Checks received in the mail should be immediately stamped “NSF” to prevent unauthorized cashing of the check. 18. Control over cash disbursements is improved if major expenditures are paid by check. 19. In a voucher system, vouchers are prepared in the accounts receivable department. 20. Electronic funds transfer (EFT) is a disbursement system that uses telephone or computer to transfer cash from one location to another. 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. 31. A company always reports restricted cash as a noncurrent asset. 32. A company with a net negative balance in its bank account should report this balance among current liabilities. 33. Companies report cash in both the balance sheet and the statement of cash flows. 34. 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. 35. In general, documents should be prenumbered and all documents should be accounted for. 36. Collusion may result when one individual circumvents prescribed controls and may significantly impair the effectiveness of a system. 37. Personnel who handle cash receipts should have the option of taking a vacation or not. 38. The duties of approving an item for payment and paying the item should be done by different departments or individuals. 39. The custodian of the petty cash fund has the responsibility of recording a journal entry every time cash is used from the fund. 40. A debit memorandum could show the collection of a note receivable by the bank. 41. To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.MULTIPLE CHOICE QUESTIONS 42. Which one of the following is not an objective of a system of internal controls?a. Safeguard company assetsb. Overstate liabilities in order to be conservativec. Enhance the accuracy and reliability of accounting recordsd. Reduce the risks of errors 43. Internal controls are concerned witha. only manual systems of accounting.b. the extent of government regulations.c. safeguarding assets.d. preparing income tax returns. 44. All of the following requirements about internal controls were enacted under the Sarbanes- Oxley Act except;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. 45. Internal control is defined, in part, as a plan that safeguardsa. all balance sheet accounts.b. assets.c. liabilities.d. capital stock. 46. Which of the following is not one of the main factors that contribute to fraudulent activity?a. Opportunityb. Incompatible dutiesc. Financial pressured. Rationalization 47. The most important element of the fraud triangle isa. financial pressure.b. incompatible duties.c. opportunity.d. rationalization.48. Internal controls are not designed to safeguard assets froma. natural disasters.b. employee theft.c. robbery.d. unauthorized use. 49. 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 ofa. inadequate internal control.b. duplication of effort.c. external verification.d. segregation of duties. 50. Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for thema. 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.More Questions are Included…