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

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Question 21

Multiple Choice

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Effective internal controls for cash include:

A) disbursements made by prenumbered check.
B) cash deposited in the bank on a timely basis.
C) written cash receipts given to customers as evidence of payment.
D) all of these answer choices are correct.

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Question 22

Multiple Choice

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While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee. Which of the following shows the effect of this transaction on the financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

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Question 23

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In a company's bank reconciliation, an outstanding check is a check that:

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

In establishing a strong internal control system at Banks Company, management is concerned with administrative controls. Administrative controls include:

Indicate whether each of the following statements about the auditor's role in financial accounting is true or false. _____ a) The proper conduct of an audit guarantees the accuracy of all figures on the financial statements. _____ b) The financial statement audit is a detailed review of a company's financial statements and documents. _____ c) The primary responsibility of the independent accounting firm is to the public. _____ d) The most favorable type of audit report is called a qualified opinion. _____ e) The ultimate responsibility for the financial statements lies with management of the company rather than the independent accounting firm.

The most favorable audit opinion that a company can receive is a(n) :

Indicate whether each of the following statements is true or false. _____ a) Debit memos in a bank statement describe transactions that increase the depositor's assets. _____ b) Credit memos in a bank statement describe transactions that act to increase the bank's liabilities. _____ c) Service fees charged by a bank appear on bank statements as credit memos. _____ d) Deposits in transit appear on the bank statement as credit memos. _____ e) Outstanding checks do not appear on the bank statement.

At March 31, Cummins Co. had a balance in its cash account of $10,400. 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 $200. The true cash balance at March 31 is:

Which of the following is not a primary role of an independent auditor?

Which of the following is an internal control procedure used to safeguard a company's assets?

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

Which of the following is not an internal control procedure for the control of cash receipts?

Which of the following is not a component of the fraud triangle?

Which of the following statements accurately describes a fidelity bond?

Which of the following is not a common feature of ethical misconduct?

Requiring separation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.

Which of the following is not a motive for the embezzlement of cash by employees?

Even a good system of internal controls can be overridden by collusion among employees.