Online Quiz 13b

Question 1

Why isn’t the 15% federal income tax withholding amount included in the computation of the cost to the University of employing Professor Eunice Burns?
The probability that the University will have to pay this amount is only 60%.
This amount is not considered to be a cost to the University until Eunice Burns retires.
The 15% federal income tax withholding amount comes from Eunice Burns herself; it is NOT a cost to the University.
This amount is not considered to be a cost to the University until after Eunice Burns has been at the University for more than 5 years.

Answer 1

Answer: The 15% federal income tax withholding amount comes from Eunice Burns herself; it is NOT a cost to the University.

Question 2

Before 1992, companies used pay-as-you-go accounting for retiree healthcare benefits. What big problem did this cause for General Motors?
General Motors made overly-generous retiree healthcare promises to its employees.
General Motors was required to pay large amounts of U.S. federal income taxes.
General Motors was required to reduce its accumulated depreciation balance by an amount equal to the estimated value of the retiree healthcare obligation.
General Motors was found to be in violation of U.S. federal securities laws and was barred by the SEC from publicly trading its shares.

Answer 2

Answer: General Motors made overly-generous retiree healthcare promises to its employees.

Question 3

Which ONE of the following is NOT an important part of INTERNAL CONTROL?
Only authorized transactions occur.
Complete and accurate records are kept.
Assets are physically safeguarded.
Retained earnings are legally registered.

Answer 3

Answer: Retained earnings are legally registered.

Question 4

In the context of the Fraud Triangle, why are good internal controls important?
  Reduce rationalization
 Reduce perceived opportunity
 Reduce perceived pressure
 Reduce personal financial losses

Answer 4

Answer: Reduce perceived opportunity

Question 5

What is the meaning of the phrase “separation of duties”?
Make employees take regular vacations.
Physical custody of assets should be separated from recordkeeping for those assets.
Don’t allow cash payments from customers.
Perceived pressure should be separated from accrual accounting.
Phrenological analysis should be separated from fraud analysis ONLY WHEN perceived opportunity is high.

Answer 5

Answer: Physical custody of assets should be separated from recordkeeping for those assets.