ACCT 3122- second half of past quiz questions

Question 1

Which of the following is the control component that reflects the attitude and actions of the board and management regarding the significance of control within the organization?

a. control activities
b. risk assessment
c. monitoring
d. control environment

Answer 1

d. control environment

Question 2

The company allows individuals who handle cash to also record transactions in the accounting system. This is an example of

a. lack of commitment to integrity and ethical values
b. deficiency in design
c. control activities
d. communication of deficiencies
e. deficiency in operation

Answer 2

b. deficiency in design

Question 3

Many organizations bond employees who handle cash (i.e. purchase insurance against theft). Regarding the risks associated with employee theft, which of the following risk management techniques does this represent?

a. accepting
b. mitigating
c. transferring
d. controlling

Answer 3

c. transferring

Question 4

Internal control can provide only reasonable assurance that the organization’s objectives will be met efficiently and effectively. One factor limiting the likelihood of achieving those objectives is that

a. the board is active and independent
b. the cost of internal control should not exceed its benefits
c. the internal auditor’s primary responsibility is the detection of fraud
d. management monitors performance

Answer 4

b. the cost of internal control should not exceed its benefits

Question 5

Assessing whether the controller of the business has a CPA and prior experience at an accounting firm falls under which area of COSO?

a. control activities
b. monitoring
c. information and communication
d. control environment
e. risk assessment

Answer 5

d. control environment

Question 6

The company uses the inventory turnover ratio to determine whether inventory is becoming obsolete. this is an example of what type of information?

a. a key performance indicator
b. budget vs. actual analysis
c. deficiency in operation
d. a key risk indicator

Answer 6

a. a key performance indicator

Question 7

The company has an internal control procedure that requires a manager to review the invoice and associated paperwork before approving it for payment. One of the managers is very busy and signs all the invoices, so he can get back to his other duties. This is an example of:

a. control activities
b. deficiency in design
c. lack of commitment to integrity and ethical values
d. communication of deficiencies
e. deficiency in operation

Answer 7

e. deficiency in operation

Question 8

The COSO framework treats internal control as a process designed to provide reasonable assurance regarding the achievemment of objectives related to

a. compliance with applicable laws and regulations
b. reliability of financial reporting
c. all of the other answers are correct
d. effectiveness and efficiency of operations

Answer 8

c. all of the other answers are correct

Question 9

According to COSO, which of the following is the most effective method to transmit a message of ethical behavior throughout an organization?

a. removing pressures to meet unrealistic targets, particularly for short-term results
b. strengthening internal audit’s ability to deter and report improper behavior
c. specifying the competence levels for every job in organization and translating those levels to requisite knowledge and skills
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Answer 9

d. demonstrating appropriate behavior by example

Question 10

within the COSO internal control- integrated framework, which of the following components is designed to ensure that internal controls continue to operate effectively?

a. monitoring
b. control environment
c. information and communication
d. risk assessment

Answer 10

a. monitoring

Question 11

research and development expenses are an example of:

a. bill of material costs
b. period costs
c. a production order
d. product costs

Answer 11

b. period costs

Question 12

which of the following is not correct regarding a physical inventory count?

a. during the physical inventory count all production and sales are shutdown whereas production and sales are not shut down for cycle counting
b. inventory records are usually more accurate when a company uses a physical inventory count versus cycle counting
c. a physical inventory count occurs sporadically whereas cycle counting occurs on a regular basis
d. a physical inventory count involves counting all the inventory versus some of the inventory

Answer 12

b. inventory records are usually more accurate when a company uses a physical inventory count versus cycle counting

Question 13

a list of the different inventory components that are used to construct a finished good is called

a. a routing
b. an assembled item
c. a master stock item
d. a bill of material
e. a sub stock item

Answer 13

d. a bill of material

Question 14

the company uses the periodic method. what account will be debited when the company makes a sale?

a. cost of goods sold
b. inventory
c. sales revenue and cost of goods sold
d. accounts receivable
e. accounts receivable and cost of goods sold

Answer 14

d. accounts receivable

Question 15

differences between inventory records and actual inventory levels can be due to all the following except for

a. spoiled inventory
b. stolen inventory
c. inventory obsolescence
d. forgone sales
e. damaged inventory

Answer 15

d. forgone sales

Question 16

safety stock is:

a. extra inventory that the company keeps on hand to ensure that it can fulfill the needs of its customers
b. the minimum quantity that i can purchase of an inventory item
c. costs that are directly related to the production of a product or service intended for sale
d. the internal control procedures used to protect inventory from theft

Answer 16

a. extra inventory that the company keeps on hand to ensure that it can fulfill the needs of its customers

Question 17

a request to manufacture a product is called a :

a. sales order
b. routing
c. production order
d. purchase order
e. bill of lading

Answer 17

c. production order

Question 18

the difference between inventory quantity on hand and inventory available is :

a. there is no difference between the two measures
b. inventory pledged to sales orders
c. inventory pledged to sales orders and production orders
d. inventory pledged to production orders

Answer 18

c. inventory pledged to sales orders and production orders

Question 19

the company uses the periodic method. what account will be debited when the company purchases inventory?

a. inventory expense
b. cost of goods sold
c. purchases
d. supplies
e. inventory

Answer 19

c. purchases

Question 20

which of the following is a characteristic of cycle counting?

a. involves counting a small subset of the total inventory
b. usually conducted on a quarterly or annual basis
c. involves shutting down all production and sales while counting occurs
d. may be required for tax regulations or financial accounting rules

Answer 20

a. involves counting a small subset of the total inventory

Question 21

Which of the following is not a characteristic of a risky customer?

a. incompetent management
b. taking advantage of payment incentives
c. a history of losses from operations
d. a poor payment record
e. inadequate working capital

Answer 21

b. taking advantage of payment incentives

Question 22

lockboxes are what type of internal controls?

a. adequate documents and records
b. human resource controls
c. access controls
d. segregation of duties
e. authorization of transactions
f. independent checks of performance

Answer 22

c. access controls

Question 23

which of the following of the following is a disadvantage of using the automated clearing house (ACH) method to handle cash receipts?

a. ACH is not a very secure way to handle transactions
b. ACH is a very expensive way to process cash receipts
c. it is more difficult to account for ACH transactions
d. not all customers can use ACH to pay their bills

Answer 23

d. not all customers can use ACH to pay their bills

Question 24

a very important customer does not pay his or her invoice on time. how should the company react?

a. have the credit manager contact the customer to discuss the matter. do not stop shipments to customer
b. send the customer threating letters
c. immediately stop all shipments t the customer
d. send the invoice to collections

Answer 24

a. have the credit manager contact the customer to discuss the matter. do not stop shipments to customer

Question 25

methods to reduce credit risk include all the following except:

a. credit limits
b. dunning letters
c. letters of credit
d. advance payments
e. terms

Answer 25

b. dunning letters

Question 26

if the company is assigning which invoices are overdue, the company should age receivables based on:

a. payment date
b. invoice date
c. invoice due date
d. all the other methods would be useful in assessing overdue collections

Answer 26

c. invoice due date

Question 27

when should the accounting system flag the customer’s order?

a. the order plus previous unpaid orders does not exceed the customer’s credit limit
b. the order does not exceed the customer’s credit limit
c. the customer is paying with cash
d. a new customer with no credit history wants to place an order

Answer 27

d. a new customer with no credit history wants to place an order

Question 28

a decrease in the days of sales outstanding (DSO) may be due to all the following except:

a. customers taking advantage of sales discounts
b. tightening of credit terns
c. an improvement in the overall economy
d. not performing credit checks

Answer 28

d. not performing credit checks

Question 29

the process of applying a customer’s payment to an open invoice is referred to as

a. manual deposit
b. cash application
c. payment incentives
d. the collection process

Answer 29

b. cash application

Question 30

the law that allows individuals to submit electronic images of a check rather than physically depositing a check is referred to as:

a. cash application
b. account stratification
c. check 21
d. the dunning rule

Answer 30

c. check 21

Question 31

all the following are examples of checks that stolen or forged except:

a. void is written on a check that was mangled by the check printer
b. the payee on the check is “cash”
c. out of order check numbers
d. duplicate check numbers

Answer 31

a. void is written on a check that was mangled by the check printer

Question 32

positive pay involves

a. submitting a phony invoice for payments
b. sending the bank a file identifying the checks written by the company
c. segregation of check signing responsibilities from storage of the check stock
d. using a purchasing card to make purchases from a supplier

Answer 32

b. sending the bank a file identifying the checks written by the company

Question 33

which of the following is not a method for handling small dollar invoices?

a. negative assurance
b. evaluated receipt settlement
c. all the other choices are methods for handling small dollar invoices
d. P-cards

Answer 33

b. evaluated receipt settlement

Question 34

maintenance of the vendor master should be:

a. does not requiring purging of one-time vendors
b. automated as much as possible to reduce costs
c. does not need to be reviewed periodically
d. should be done manually

Answer 34

d. should be done manually

Question 35

all the following are common problems associated with processing payments to suppliers except

a. negative assurance
b. fraudulent invoices
c. invoices that do not match the receiving report
d. small dollar invoices

Answer 35

a. negative assurance

Question 36

segregation of duties involving checks involves:

a. ensuring that the check signer also handles the bank recs
b. ensuring that the check signer properly secures the signature plate in a safe location when not in service
c. ensuring that the person who records the vendor invoices also distributes the vendor checks
d. ensuring that the person who records the vendor invoice can also sign the checks
e. ensuring that the check signer has access to the check stock (blank checks)

Answer 36

b. ensuring that the check signer properly secures the signature plate in a safe location when not in service

Question 37

with evaluated receipt settlement, what document is eliminated?

a. the purchase order
b. the invoice
c. the purchase requisition
d. the receiving report

Answer 37

b. the invoice

Question 38

what is a rush check?

a. a check that is sent electronically versus through the mail
b. a check where the company has rushed to stop payment
c. a check that needs to go out immediately and does not follow the normal accounting procedures
d. a check written to the band “rush”

Answer 38

c. a check that needs to go out immediately and does not follow the normal accounting procedures

Question 39

important internal controls for the vendor master include all the following except:

a. calling the supplier to verify that the information is accurate
b. making the supplier complete a vendor application form before paying the supplier
c. including one time vendors ( vendors that are paid only once) in the vendor master
d. requiring approval by independent person before the change is made to vendor master
e. performing an independent review of any changes to the vendor master file

Answer 39

c. including one time vendors ( vendors that are paid only once) in the vendor master

Question 40

business email compromise involves
a. fraudsters sending fake invoices through email
b. a hacker gaining access to the company’s email system
c. fraudsters sending emails pretending to be vendors or company senior management requesting either a change in bank account information or a transfer of funds to a fraudulent account
d. an accounts payable clerk compromising with the supplier regarding the amount of the invoice

Answer 40

c. fraudsters sending emails pretending to be vendors or company senior management requesting either a change in bank account information or a transfer of funds to a fraudulent account