CHAPTER 4 SMARTBOOK Flashcards
Internal control includes
compliance with applicable laws and regulations
reliable financial reporting
safeguarding assets
When duties are separated
collusion is necessary to commit fraud or theft
the work of one employee acts as a check on the work of another employee
Hiring quality employees enhances internal controls because they are
able to perform tasks as expected
able to rotate jobs
Requiring employees to take regular vacations enhances internal controls because it
makes it harder to cover up fraudulent activities
The SEC requires public companies to evaluate their internal control and to publish those findings with their filings.
False. the SOX is the one who required it
Which of the following statements are correct?
Which of the following statements are correct?
To help ensure proper segregation of duties, which of the following functions should be performed by separate individuals whenever possible?
authorization
recording
custody of assets
When training employees
it is best to train them to perform a variety of tasks
To promote the hiring of employees with high levels of personal integrity, employers should
seek recommendations from prior employers or educators
screen job applicants using interviews
perform background checks
Which of the following statements about authority and responsibility are true?
Employees are motivated to work harder when they have the authority to use their own judgment.
Employees exercise reasonable caution when they are held responsible for their actions.
To help prevent fraudulent employee activities from being covered up,
duties should be rotated periodically
regular vacations should be required
NO “THOSE WHO AUTHORIZE TRANSACTIONS SHOULD ALSO RECORD THEM” because it violates segregation of duties
Appropiate accounting processes should be documented in
procedures manual that is routinely updates
An examples of separation of duties is
using one person to approve a sales return and a different person to issue credit to the customer
Prenumbers forms are used in
Purchase orders
Receiving reports
Invoices
Checks
A policy that states “investment decisions are authorized at the division level, while hiring decisions are authorized at the departmental level” is an example of a(n)
authorization.
SPECIFIC AUTHORIZATION
Examples of physical controls include
unannounced counts to verify the presence of company-owned equipment
keeping accounting records in a fireproof safe
Inventory kept in a storeroom and not released without proper authorization
Serial numbers on quipment should be recorderd along the name of individual responsible for the equipment
Unannounced prysical counts conducted randomny
Certificated of deposit and markeable secutiries in fireprood vaults
Access to vaults should be limited to authorized personnel
Employing a public accounting firm to conduct an audit is an example of
Performance evaluation
To help ensure proper segregation of duties, which of the following functions should be performed by separate individuals whenever possible?
Prenumbered forms
are used for all important documents
should be simple and easy to use
Human error is a common cause of internal control failure.
True
Keeping a record of the serial numbers of equipment along with name of the individual who is responsible for the equipment is an example of a(n) Blank______ control
Physical
Performance evaluations are necessary because
few people can objectively evaluate their own performance
Savings accounts that impose substantial penalties for early withdrawal should be classified as
Investments
Which of the following is not an internal control procedure commonly used to safeguard cash?
Keep all cash in one central location: For many businesses, it is not possible to keep cash in one location. For example, many department stores have cash registers located throughout their stores.
