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Exam 4: Internal Controls, Accounting for Cash, and Ethics

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Question 21

Multiple Choice

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Which of the following statements accurately describes a fidelity bond?

A) Procedures to provide reasonable assurance that the objectives of a company are accomplished
B) Proper procedures for processing transactions.
C) Insurance that the company buys to protect itself from loss due to employee dishonesty
D) Guidelines or policies that limit the actions of different levels of management

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Question 22

Multiple Choice

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While preparing its bank reconciliation, Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee. Which of the following shows the effect of this transaction on the financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

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Question 23

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Requiring separation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.

Which of the following is an internal control procedure used to safeguard a company's assets?

Which of the following is not a primary role of an independent auditor?

Which of the following is not a common feature of ethical misconduct?

The most favorable audit opinion that a company can receive is a(n) :

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

The internal controls of a business are designed to reduce the probability of occurrence of fraud.

Indicate whether each of the following statements is true or false. _____ a) Debit memos in a bank statement describe transactions that increase the depositor's assets. _____ b) Credit memos in a bank statement describe transactions that act to increase the bank's liabilities. _____ c) Service fees charged by a bank appear on bank statements as credit memos. _____ d) Deposits in transit appear on the bank statement as credit memos. _____ e) Outstanding checks do not appear on the bank statement.

Which of the following is not an internal control procedure for the control of cash receipts?

In a company's bank reconciliation, an outstanding check is a check that:

Which of the following is not a component of the fraud triangle?

Effective internal controls for cash include:

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

Indicate whether each of the following statements about the auditor's role in financial accounting is true or false. _____ a) The proper conduct of an audit guarantees the accuracy of all figures on the financial statements. _____ b) The financial statement audit is a detailed review of a company's financial statements and documents. _____ c) The primary responsibility of the independent accounting firm is to the public. _____ d) The most favorable type of audit report is called a qualified opinion. _____ e) The ultimate responsibility for the financial statements lies with management of the company rather than the independent accounting firm.

In establishing a strong internal control system at Banks Company, management is concerned with administrative controls. Administrative controls include:

Even a good system of internal controls can be overridden by collusion among employees.

At March 31, Cummins Co. had a balance in its cash account of $10,400. At the end of March the company determined that it had outstanding checks of $900, deposits in transit of $600, a bank service charge of $20, and an NSF check from a customer for $200. The true cash balance at March 31 is:

Which of the following is not a motive for the embezzlement of cash by employees?