Question Details

CHAPTER 8 FRAUD, INTERNAL CONTROL, AND CASH

COMPUTER S 230 CHAPTER 8 PART 4

MULTIPLE CHOICE QUESTIONS
	39.	Which one of the following is not an objective of a system of internal controls?
a.	Safeguard company assets
b.	Overstate liabilities in order to be conservative
c.	Enhance the accuracy and reliability of accounting records
d.	Reduce the risks of errors


	40.	Internal controls are concerned with
a.	only manual systems of accounting.
b.	the extent of government regulations.
c.	safeguarding assets.
d.	preparing income tax returns.


	41.	Which of the following is not one of the main factors that contribute to fraudulent activity?
a.	Opportunity.
b.	Incompatible duties.
c.	Financial Pressure.
d.	Rationalization.

42.	Internal control is defined, in part, as a plan that safeguards
a.	all balance sheet accounts.
b.	assets.
c.	liabilities.
d.	capital stock.


	43.	The most important element of the fraud triangle is
a.	financial pressure.
b.	incompatible duties.
c.	opportunity.
d.	rationalization.


	44.	Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices Act of 1977
a.	may do so legally by obtaining an exemption.
b.	will be automatically dissolved.
c.	may be subject to fines and officer imprisonment.
d.	may be forced to sell their foreign subsidiaries.


	45.	Internal controls are not designed to safeguard assets from
a.	natural disasters.
b.	employee theft.
c.	robbery.
d.	unauthorized use.

	46.	Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of
a.	inadequate internal control.
b.	duplication of effort.
c.	external verification.
d.	segregation of duties.


	47.	Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them
a.	increases the potential for errors and fraud.
b.	decreases the potential for errors and fraud.
c.	is an example of good internal control.
d.	is a good example of safeguarding the company's assets.


48.	The custodian of a company asset should
a.	have access to the accounting records for that asset.
b.	be someone outside the company.
c.	not have access to the accounting records for that asset.
d.	be an accountant.


	49.	Internal auditors
a.	are hired by CPA firms to audit business firms.
b.	are employees of the IRS who evaluate the internal controls of companies filing tax returns.
c.	evaluate the system of internal controls for the companies that employ them.
d.	cannot evaluate the system of internal controls of the company that employs them because they are not independent.


	50.	When two or more people get together for the purpose of circumventing prescribed controls, it is called
a.	a fraud committee.
b.	collusion.
c.	a division of duties.
d.	bonding of employees.


	51.	From an internal control standpoint, the asset most susceptible to improper diversion and use is
a.	prepaid insurance.
b.	cash.
c.	buildings.
d.	land.


	52.	The principle of establishing responsibility does not include
a.	one person being responsible for one task.
b.	authorization of transactions.
c.	independent internal verification.
d.	approval of transactions.


	53.	The control principle related to not having the same person authorize and pay for goods is known as
a.	establishment of responsibility.
b.	independent internal verification.
c.	segregation of duties.
d.	rotation of duties.


54.	Two individuals at a retail store work the same cash register. You evaluate this situation as
a.	a violation of establishment of responsibility.
b.	a violation of segregation of duties.
c.	supporting the establishment of responsibility.
d.	supporting internal independent verification.


	55.	An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of
a.	establishment of responsibility is violated.
b.	independent internal verification is violated.
c.	documentation procedures is violated.
d.	segregation of duties is violated.


	56.	Controls that enhance the accuracy and reliability of the accounting records are
a.	automated controls.
b.	external controls.
c.	mechanical and electronic controls.
d.	physical controls.


	57.	Related selling activities do not include
a.	ordering the merchandise.
b.	making a sale.
c.	shipping the goods.
d.	billing the customer.


	58.	The independent internal verification principle involves each of the following except the ______________ of data prepared by other employees.
a.	comparison
b.	reconciliation
c.	review
d.	segregation


	59.	Related buying activities include
a.	ordering, receiving, paying.
b.	ordering, selling, paying.
c.	ordering, shipping, billing.
d.	selling, shipping, paying.


 
	60.	Jolene is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates
a.	documentation procedures are violated.
b.	independent internal verification is violated.
c.	segregation of duties is violated.
d.	establishment of responsibility is violated.