Question 1

On a bank reconciliation, which of the following would be deducted from the balance per books?

Accepted Answer

A)  outstanding cheques
B)  deposits in transit
C)  electronic payment by a customer on account
D)  bank service charges

Question 2

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Accepted Answer

A) True 
 B)False

Question 3

Debt investments due within three months are normally classified as cash equivalents.

Accepted Answer

A) True 
 B)False

Question 4

Joe is warehouse custodian and also maintains the accounting records of the inventory held at the warehouse.Which control activity is violated?

Accepted Answer

A)  documentation
B)  independent checks of performance
C)  segregation of duties
D)  authorization of transactions and activities

Question 5

Two employees at a retail store work the same cash register.You evaluate this situation as

Accepted Answer

A)  a violation of authorization of transactions and activities.
B)  a violation of segregation of duties.
C)  supporting the authorization of transactions and activities.
D)  supporting independent checks of performance.

Question 6

Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:

Accepted Answer

A)  Accounts Receivable 
B)  Cash 
C)  Bank Charges Expense 
D)  No adjusting entry is necessary.

Question 7

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Accepted Answer

A)  pre-signed blank cheques
B)  Different individuals approve and make payments.
C)  Blank cheques are stored with limited access.
D)  The bank statement is reconciled monthly.

Question 8

Outstanding cheques from the prior period which clear the bank in the current period

Accepted Answer

A)  should be added to the balance per books.
B)  should be deducted from the balance per books.
C)  should be deducted from the balance per bank.
D)  do not affect the current period's bank reconciliation.

Question 9

Physical controls are not designed to safeguard assets from

Accepted Answer

A)  natural disasters.
B)  employee theft.
C)  robbery.
D)  unauthorized use.

Question 10

When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.

Accepted Answer

A) True 
 B)False

Question 11

Control over cash disbursements is improved if all expenditures are paid by cheque or through use of electronic funds transfers.

Accepted Answer

A) True 
 B)False

Question 12

External auditors are usually employees of the company.

Accepted Answer

A) True 
 B)False

Question 13

Electronic funds transfers never have to be recorded.

Accepted Answer

A) True 
 B)False

Question 14

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

Accepted Answer

A) True 
 B)False

Question 15

Independent internal reviews should be done

Accepted Answer

A)  at the end of each accounting period.
B)  at the end of each month.
C)  periodically on a surprise basis.
D)  by the external auditor.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A cash budget will help determine if additional financing will be necessary.

Accepted Answer

A) True 
 B)False

Question 18

On a bank reconciliation, which of the following would be added to the balance per books?

Accepted Answer

A)  outstanding cheques
B)  deposits in transit
C)  electronic payment by a customer on account
D)  bank service charges

Question 19

Which one of the following items would not be considered cash?

Accepted Answer

A)  debit cards
B)  money orders
C)  coins
D)  post-dated cheques

Question 20

Blank cheques

Accepted Answer

A)  should be safeguarded.
B)  should be pre-signed.
C)  do not need to be safeguarded since they must be signed to be valid.
D)  should not be prenumbered.

Exam 7: Fraud, Internal Control, and Cash

Debt investments due within three months are normally classified as cash equivalents.

Correct AnswerverifiedShow Answer

Two employees at a retail store work the same cash register.You evaluate this situation as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

Correct AnswerverifiedShow Answer

On a bank reconciliation, which of the following would be added to the balance per books?

Correct AnswerverifiedShow Answer

External auditors are usually employees of the company.

Correct AnswerverifiedShow Answer

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Correct AnswerverifiedShow Answer

When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.

Correct AnswerverifiedShow Answer

Control over cash disbursements is improved if all expenditures are paid by cheque or through use of electronic funds transfers.

Correct AnswerverifiedShow Answer

Which one of the following items would not be considered cash?

Correct AnswerverifiedShow Answer

Electronic funds transfers never have to be recorded.

Correct AnswerverifiedShow Answer

Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:

Correct AnswerverifiedShow Answer

On a bank reconciliation, which of the following would be deducted from the balance per books?

Correct AnswerverifiedShow Answer

Outstanding cheques from the prior period which clear the bank in the current period

Correct AnswerverifiedShow Answer

Independent internal reviews should be done

Correct AnswerverifiedShow Answer

Joe is warehouse custodian and also maintains the accounting records of the inventory held at the warehouse.Which control activity is violated?

Correct AnswerverifiedShow Answer

A cash budget will help determine if additional financing will be necessary.

Correct AnswerverifiedShow Answer

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Correct AnswerverifiedShow Answer

Blank cheques

Correct AnswerverifiedShow Answer

Physical controls are not designed to safeguard assets from

Correct AnswerverifiedShow Answer

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