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Financial Accounting (Exam Two) > Chapter 6 Questions > Flashcards

Chapter 6 Questions Flashcards

1
Q

An internal control system is used to do all of the following

A

protect assets
ensure reliable accounting
promote efficient operations
uphold company policies

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2
Q

Sarbanes-Oxley Act requires each of the following:

A

effective internal control
auditors must evaluate internal controls
violators receive harsh penalties
auditor’s work is overseen by the PCAOB

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3
Q

The work of one person acts as a check on another person to prevent fraud and errors.

A

Divide responsibilities

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4
Q

Responsibility for a task should be clearly established and assigned to one person

A

Establish responsibilities

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5
Q

Use of cash registers, time clocks and personal identification scanners to improve internal control.

A

Apply technological controls

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5
Q

Use of detailed records to help prevent loss of assets.

A

Maintain adequate records

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6
Q

Technology helps managers to monitor and control business activities and includes each of the following except less extensive testing of records. True or False?

A

True

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7
Q

Employee has a low risk of getting caught committing fraud.

A

Opportunity

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7
Q

Employees justifying fraudulent behavior.

A

Rationalization

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8
Q

A person feels pressure to commit fraud.

A

Pressure

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8
Q

A person feels pressure to commit fraud.

A

Pressure

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9
Q

All of the following are examples of controls of cash except a person handling the cash is the same person who records receipt of that cash. True or False?

A

True

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10
Q

Cash management strategies include maximizing other assets. True or False?

A

False

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11
Q

The supervisor should compare the register transactions with the cash receipts report to make sure that both are correct. True or false?

A

True

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12
Q

The listing of cash received via mail should be sent to each of the following individuals:

A

cashier
record-keeper
mail clerk

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13
Q

Used by bank employees to verify signatures on checks.

A

Signature card

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14
Q

Lists items such as currency and checks along with their dollar amounts.

A

Deposit ticket

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15
Q

A transfer of cash from one party to another that does not involve a paper document.

A

Electronic funds transfer

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15
Q

Signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient.

A

Check

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16
Q

Interest earned on a checking account is a deduction on a bank statement. True or False?

A

False

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17
Q

Select the items below which must be adjusted to the book balance:

A

book error
interest earned on checking account
collections of accounts receivable by the bank

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18
Q

Days’ sales uncollected is computed by:

A

dividing accounts receivable by net sales and multiplying by 365

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19
Q

There is $500 in cash missing from a cash register drawer. Three salesclerks shared the cash register drawer, so the owner cannot determine who is at fault.

A

Establish responsibilities

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20
Q

An employee stole thousands of dollars worth of equipment over many years. It took years for the company to discover the fraud because accounting records for equipment were rarely updated.

A

Maintain adequate records

21
Q

An employee requested merchandise be purchased, then approved the purchase request, and finally made payment to a fake supplier. The employee stole a considerable amount of money under this scheme.

A

Divide responsibility for related transactions

22
Q

Cash registers contain locked electronic files that keep records of each sale.

A

Apply technological controls

23
Q

The company divides responsibility for a transaction between multiple departments.

A

Divide responsibility for related transactions

24
Q

Each cashier is designated a specific cash drawer and is solely responsible for cash in that drawer.

A

Establish responsibilities

25
Q

The most important assets of the business are insured.

A

Insure assets and bond key employees

26
Q

Preprinted forms are used to reduce the chance of missing transaction details.

A

Maintain adequate records

27
Q

The company’s internal auditors frequently assess the performance of internal controls.

A

Perform regular and independent reviews

28
Q

The owner does not use ID scanners to limit access to expensive merchandise. Instead, the owner argues they hire honest employees.

A

Weakness; Apply technological controls

29
Q

An employee cannot approve their own request for purchases of inventory.

A

Strength; Divide responsibility for related transactions

30
Q

Several salesclerks share the same cash drawer.

A

Weakness; Establish responsibilities

30
Q

Several salesclerks share the same cash drawer.

A

Weakness; Establish responsibilities

31
Q

Employees that handle easily transferable assets such as cash are bonded.

A

Strength; Insure assets and bond key employees

32
Q

The company devotes resources towards keeping accurate accounting records for machinery.

A

Strength; Maintain adequate records

33
Q

Cash receipts and cash payments are regularly planned and reviewed.

A

Good; Plan expenditures

34
Q

Bills are paid as soon as they are received.

A

Bad; Delay payment of liabilities

35
Q

Customers are offered discounts to pay early.

A

Good; Encourage collection of receivables

36
Q

Customers are offered discounts to pay early.

A

Good; Encourage collection of receivables

37
Q

Excess cash is put into short-term investments to earn extra income.

A

Good; Invest excess cash

38
Q

All equipment is purchased, even if it is infrequently used.

A

Bad; Keep only necessary assets

39
Q

One employee with many years of experience is solely in charge of opening cash receipts received by mail.

A

Weakness

40
Q

All sales transactions, even those for less than $1, are recorded on a cash register.

A

Strength

41
Q

Two employees are tasked with opening mail that contains cash receipts.

A

Strength

42
Q

Cash registers have a permanent, locked-in electronic record of each transaction.

A

Strength

43
Q

The clerk who has access to cash in the register cannot access the accounting records to change transaction details.

A

Strength

44
Q

A list of cash receipts by mail includes the sender’s name, the dollar amount, and an explanation of why the money was sent.

A

Strength

45
Q

Payments over $100 are made by check.

A

Strength

46
Q

Requesting and receiving merchandise is handled by the same department.

A

Weakness

47
Q

Payments of less $100 are made through petty cash.

A

Strength

48
Q

Large amounts of cash are kept in a drawer to pay liabilities over $1,000.

A

Weakness

49
Q

Only authorized departments and individuals can incur liabilities.

A

Strength

50
Q

When the company runs out of checks, it pays liabilities with cash.

A

Weakness

51
Q

Are accounts receivable cash equivalents?

A

No

52
Q

Are checks cash equivalents?

A

Yes

53
Q

Are checks cash equivalents?

A

Yes

54
Q

What counts as a short-term investment?

A

With-in 3 months

Financial Accounting (Exam Two) (6 decks)

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