Question 1

The petty cash fund represents cash on hand and is used to pay for minor purchases.

Accepted Answer

A) True 
 B)False

Question 2

The three elements of the fraud triangle are:

Accepted Answer

A)  Motive.
B)  Rationalization.
C)  Opportunity.
D)  All of the other answers are elements of the fraud triangle.

Question 3

Cash receipts of the company that have not been added to the bank's record of the company's balance are referred to as checks outstanding.These are referred to as deposits outstanding.

Accepted Answer

A) True 
 B)False

Question 4

Recording all cash receipts as soon as possible is considered a good internal control.

Accepted Answer

A) True 
 B)False

Question 5

Which employees are the ones who must take final responsibility for the establishment and success of internal controls?

Accepted Answer

A)  Top executives.
B)  Mid-level managers.
C)  Lower-level employees.

Question 6

Investing cash flows would include which of the following?

Accepted Answer

A)  Payment of cash dividends to stockholders.
B)  Purchase of office supplies with cash.
C)  Purchase of a building with cash.

Question 7

Which employees have an impact on the operation and effectiveness of internal controls?

Accepted Answer

A)  Upper management.
B)  Mid-level managers.
C)  Lower-level employees.
D)  All employees.

Question 8

Which of the following best describes the goal of internal controls?

Accepted Answer

A)  Ensuring the business is profitable.
B)  Enhancing the health of employees.
C)  Improving the accuracy and the reliability of financial information.

Question 9

Common examples of cash equivalents include all of the following except:

Accepted Answer

A)  Money market funds.
B)  Treasury bills.
C)  Certificates of deposit.
D)  Accounts receivable.

Question 10

Under the Sarbanes-Oxley Act,management is responsible for:

Accepted Answer

A)  Analysts' having positive comments about the company's operations.
B)  The reliability of financial statements.
C)  Increasing the company's stock price.

Question 11

Common types of financial statement fraud include creating fictitious revenues from a fake customer,improperly valuing assets,and mismatching revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 12

Typically,the more volatile the company's trend in operating cash flows,the higher the operating risk of the company.

Accepted Answer

A) True 
 B)False

Question 13

When a company pays for services received using a check,it should credit Accounts Payable until the check is paid by the bank.The credit is to the Cash account.

Accepted Answer

A) True 
 B)False

Question 14

The Sarbanes-Oxley Act (SOX) mandates which of the following?

Accepted Answer

A)  Increased regulations related to auditor-client relations.
B)  Increased regulations related to internal control.
C)  Increased regulations related to corporate executive accountability.
D)  All of the other answers represent mandates of the Sarbanes-Oxley Act.

Question 15

The asset most susceptible to theft is:

Accepted Answer

A)  Equipment.
B)  Accounts receivable.
C)  Building.
D)  Cash.

Question 16

Which of the following would NOT need to be accounted for in a bank reconciliation?

Accepted Answer

A)  Deposits outstanding recorded by the company but not the bank.
B)  Interest earned recorded by the bank but not the company.
C)  NSF checks recorded by the bank but not by the company.
D)  Checks written by the company and recorded by the bank.

Question 17

A framework for designing an internal control system is provided by the Financial Accounting Standards Board (FASB).A framework for designing an internal control system is provided by the Committee of Sponsoring Organizations (COSO)of the Treadway Commission.

Accepted Answer

A) True 
 B)False

Question 18

Risk assessment procedures include periodic reviews of internal controls,assessing management's oversight of the internal control,developing solutions to known cases of internal control failures,and determining whether each division or operation within a company is meeting its objectives.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an example of preventive controls?

Accepted Answer

A)  Separation of duties.
B)  Physical controls.
C)  Proper authorization.
D)  Reconciliations.

Question 20

Investing activities include cash transactions involving revenue and expense events during the period.These are operating activities.

Accepted Answer

A) True 
 B)False

Exam 4: Cash and Internal Controls

A framework for designing an internal control system is provided by the Financial Accounting Standards Board (FASB).A framework for designing an internal control system is provided by the Committee of Sponsoring Organizations (COSO)of the Treadway Commission.

Correct AnswerverifiedShow Answer

Cash receipts of the company that have not been added to the bank's record of the company's balance are referred to as checks outstanding.These are referred to as deposits outstanding.

Correct AnswerverifiedShow Answer

Under the Sarbanes-Oxley Act,management is responsible for:

Correct AnswerverifiedShow Answer

Typically,the more volatile the company's trend in operating cash flows,the higher the operating risk of the company.

Correct AnswerverifiedShow Answer

Which employees are the ones who must take final responsibility for the establishment and success of internal controls?

Correct AnswerverifiedShow Answer

Which of the following is not an example of preventive controls?

Correct AnswerverifiedShow Answer

Which employees have an impact on the operation and effectiveness of internal controls?

Correct AnswerverifiedShow Answer

The petty cash fund represents cash on hand and is used to pay for minor purchases.

Correct AnswerverifiedShow Answer

Risk assessment procedures include periodic reviews of internal controls,assessing management's oversight of the internal control,developing solutions to known cases of internal control failures,and determining whether each division or operation within a company is meeting its objectives.

Correct AnswerverifiedShow Answer

The asset most susceptible to theft is:

Correct AnswerverifiedShow Answer

The three elements of the fraud triangle are:

Correct AnswerverifiedShow Answer

Which of the following would NOT need to be accounted for in a bank reconciliation?

Correct AnswerverifiedShow Answer

When a company pays for services received using a check,it should credit Accounts Payable until the check is paid by the bank.The credit is to the Cash account.

Correct AnswerverifiedShow Answer

Investing activities include cash transactions involving revenue and expense events during the period.These are operating activities.

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act (SOX) mandates which of the following?

Correct AnswerverifiedShow Answer

Common types of financial statement fraud include creating fictitious revenues from a fake customer,improperly valuing assets,and mismatching revenues and expenses.

Correct AnswerverifiedShow Answer

Recording all cash receipts as soon as possible is considered a good internal control.

Correct AnswerverifiedShow Answer

Common examples of cash equivalents include all of the following except:

Correct AnswerverifiedShow Answer

Which of the following best describes the goal of internal controls?

Correct AnswerverifiedShow Answer

Investing cash flows would include which of the following?

Correct AnswerverifiedShow Answer

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