Exam 4 (Modules 8 & 9)

Question 1

the policies and procedures a buisness puts in place to (1) protect its assets, (2) promote efficient operations, (3) ensure reliable accounting and (4) uphold various laws, regulations, and policies

Answer 1

internal controls

Question 2

wrongful or criminal deception intended to result in financial or personal gain

Answer 2

fraud

Question 3

theft or misappropriation of funds placed in one’s trust or belonging to ones employer

Answer 3

embezzlement

Question 4

what are the three factors in place when a person commits fraud?

Answer 4

opportunity, pressure, and rationalization

Question 5

refers to the internal control weaknesses within the business

Answer 5

opportunity

Question 6

refers to some form of family, societal, or finanical stress

Answer 6

pressure

Question 7

refers to the employees need to justify their behavior

Answer 7

rationalization

Question 8

what are the five components of an internal control system?

Answer 8

control environment, risk assessment, control activities, information and communication, and monitoring

Question 9

what are the seven principles of internal control?

Answer 9

establish responsibilities, maintain adequate records, insure assets and bond key employees, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, perform regular and independent reviews

Question 10

a secret agreement for fraudulent or illegal purposes

Answer 10

collusion

Question 11

states that the cost of an internal control should not exceed its benefit

Answer 11

cost-benefit principle

Question 12

includes currency, coins, and deposits in bank accounts, it also includes any item that could be deposited into the bank account: customer checks, cashier checks, and money orders

Answer 12

cash

Question 13

to make sure you always have just enough cash on hand to make any necessary payments

Answer 13

primary goal of cash management

Question 14

what are the five cash management principles?

Answer 14

collect receivables as soon as possible, do not pay liabilities until they are, only keep the assets that are really needed, plan expenditures, invest excess cash

Question 15

what are the two ways cash is received?

Answer 15

over the counters or in the mail

Question 16

this department initiates the purchase by completing the purchase requisition in triplicate

Answer 16

requesting department

Question 17

this department is made aware that goods are needed when they receive the purchase requisition from the requesting department

Answer 17

purchasing department

Question 18

this department is made aware that goods have been ordered when they receive a copy of the purchase order from the purchasing department

Answer 18

shipping/recieving

Question 19

this department is the only department that receives a copy of the invoice from vendor

Answer 19

accounting department

Question 20

this department receives the invoice approval, they write and send a check to the vendor

Answer 20

cashier

Question 21

to identify differences between the bank balance and the book balance, to ensure checks have been processed, and deposits have been made, and to adjust the cash account for any adjustments or corrections

Answer 21

purpose of a bank reconcilation

Question 22

deposits that the business has made that are not listed on the bank statement

Answer 22

deposits in transit

Question 23

occurs when a business writes a check, but the bank is not yet aware of the check

Answer 23

outstanding checks

Question 24

occurs when the business has loaned a customer or another entity money in the form of a note receivable

Answer 24

unrecorded cash receipts

Question 25

occurs when either (a) interest is collected on the note receivable discussed in the previous section or (b) when the bank pays the business interest on the money in its account

Answer 25

interest earned

Question 26

amounts the bank charges for maintaining an individual or business checking account

Answer 26

bank fees

Question 27

checks the business has received and deposited in their checking accounting

Answer 27

NSF checks