Question Details

CHAPTER 8 INTERNAL CONTROL AND CASH PART 5

MULTIPLE CHOICE QUESTIONS


61. Physical controls to safeguard assets do not include
a. cashier department supervisors.
b. vaults.
c. employee identification badges.
d. security guards.
62. In large companies, the independent internal verification procedure is often assigned to
a. computer operators.
b. management.
c. internal auditors.
d. outside CPAs.
8 - 10 Test Bank for Accounting Principles, Eighth Edition
63. Maximum benefit from independent internal verification is obtained when
a. it is made on a pre-announced basis.
b. it is done by the employee possessing custody of the asset.
c. discrepancies are reported to management.
d. it is done at the time of the audit.
64. If employees are bonded
a. it means that they are not allowed to handle cash.
b. they have worked for the company for at least 10 years.
c. they have been insured against misappropriation of assets.
d. it is impossible for them to steal from the company.
65. Mrs. Smith has worked for Arcco Inc., for 20 years without taking a vacation. An internal
control feature that would address this situation would be
a. other controls.
b. establishment of responsibility.
c. physical controls.
d. documentation procedures.
66. A system of internal control
a. is infallible.
b. can be rendered ineffective by employee collusion.
c. invariably will have costs exceeding benefits.
d. is premised on the concept of absolute assurance.
67. For accounting purposes, postdated checks (checks payable in the future) are considered
to be
a. money orders.
b. cash.
c. petty cash.
d. accounts receivable.
68. Postage stamps on hand are considered to be
a. cash.
b. petty cash.
c. cash equivalents.
d. a prepaid expense.
69. Which one of the following items would not be considered cash?
a. Coins
b. Money orders
c. Currency
d. Postdated checks
70. Checks received through the mail should
a. immediately be endorsed "For Deposit Only."
b. be sent to the accounts receivable subsidiary ledger clerk for immediate posting to the
customer's account.
c. be cashed at the bank as soon as possible.
d. be "rung up" on a cash register immediately.
Internal Control and Cash 8 - 11
71. Proper control for over-the-counter cash receipts includes
a. a cash register with totals visible to the customer.
b. using electronic cash registers with no tapes.
c. cash count sheets requiring only the supervisor's signature.
d. cash count sheets requiring only the cashier's signature.
72. A company stamps checks received in the mail with the words "For Deposit Only". This
endorsement is called a(n)
a. blank endorsement.
b. rubber stamp.
c. restrictive endorsement.
d. operational endorsement.
73. The daily cash count of cash register receipts made by department supervisors is an
example of
a. other controls.
b. independent internal verification.
c. establishment of responsibility.
d. segregation of duties.
74. The use of remittance advices for mail receipts is an example of
a. documentation procedures.
b. other controls.
c. physical controls.
d. independent internal verification.
75. Allowing only designated personnel to handle cash receipts is an example of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
76. Control over cash disbursements is generally more effective when
a. all bills are paid in cash.
b. disbursements are made by the accounts payable subsidiary clerk.
c. payments are made by check.
d. all purchases are made on credit.
77. Reconciling the bank statement monthly is an example of
a. segregation of duties.
b. independent internal verification.
c. establishment of responsibility.
d. documentation procedures.
78. An exception to disbursements being made by check is acceptable when cash is paid
a. to an owner.
b. to employees as wages.
c. from petty cash.
d. to employees as loans.
8 - 12 Test Bank for Accounting Principles, Eighth Edition
79. Allowing only the treasurer to sign checks is an example of
a. documentation procedures.
b. segregation of duties.
c. other controls.
d. establishment of responsibility.
80. Blank checks
a. should be safeguarded.
b. should be pre-signed.
c. do not need to be safeguarded since they must be signed to be valid.
d. should not be prenumbered.