ac test 2

What are reasons internal controls can never completely prevent and detect errors and fraud?

Costs exceed benefits Human error Collusion

Which of the following are typical reconciling items on the book side of a reconciliation because the company did not know about these items until it got the bank statement?

Electronic funds transfers Interest income Services charges

information and communication

Refers to the documentation of activities that promote effective internal controls

Monitoring activities

Refers to the evaluation of internal controls to determine if they are working as intented

control activities

Refers to the work responsibilities and duties completed to reduce risks to an acceptable level

perpetual inventory system

inventory is updated every time inventory is bought, sold, or returned

FOB destination

the sale is

FOB shipping point

the sale is recorded when the goods leave the seller's shipping department

A bank reconciliation is a

internal report prepared to compare the company's cash records with the bank statement

periodic inventory system

inventory records are updated at the end of the accounting period to determine how much merchandise has been sold

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered ________ _________ that identifies the supplier, the delivery location, and the approved quantity and cost

purchase order

Acme, Inc.'s books show an ending cash balance of $10,000 before preparing the bank reconciliation. Given the bank reconciliation shows outstanding checks of $3,000; deposits in transit of $2,000; NSF check of $100; and interest earned on the bank account of $10, the company's up-to-date ending cash balance equals ______.

$9,910 (=$10,000 - 100 + 10)

What would cause a bank statement not to agree with the cash balance in the accounting records?

The bank made an error in recording a deposit made by the company. The bank paid interest that the company has not recorded. The company made an error in recording a deposit. Deposits outstanding that have been recorded on the company's records, but not on the bank's.

Which of the following are elements of good internal control over cash receipts?

Two employees cannot share the same cash drawer Cash receipts are summarized and their total is calculated A different employee deposits the cash at the bank

Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act? a. Conceal fraud b. Reduce opportunities for fraud c. Encourage good character d. Counteract incentives for fraud

a. conceal fraud

The benefits of internal control procedures are that they ______. (Check all that apply.) a. enhance the reliability of accounting information b. decrease a firm's taxes, which increases its available cash c. improve the efficiency and effectiveness of operations d. protect against theft of assets

a. enhance the reliability of accounting information d. protect against theft of assets

Which of the following is an example of weak internal controls? a. The mail-room clerk records daily cash receipts in the journal. b. Employees must take vacations. c. The accounting department compares goods received with the related purchase order.

a. the mail room clerk records daily cash reciepts in the journal

fraud is

an attempt to decieve others for personal gain

The Sarbanes-Oxley (SOX) Act provides increased regulations for ______.

auditors internal controls corporate executives

deposit in transit are added to the _____ side of the bank reconciliation

bank

Your customer's NSF check found on the bank statement is a reconciling item on a bank reconciliation and will need to be ______.

deducted from your cash balance in your accounting records

True or false: The person who has custody of an asset should also account for the asset. A person who performs both duties will best know what the balance should be in the accounting records.

false

3 factors of fraud

incentive opportunity rationilization

Paying by check helps a business to control cash when the ______.

manager studies the documents supporting the payment before signing the check checks are prenumbered and written sequentially

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered _____ that identifies the supplier, the delivery location, and the approved quantity and cost.

purchase order

Cashiers at a supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

segregate duties

Control environment

Refers to helping people in the organization to understand the importance of internal control

risk assessment

Refers to the continuous evaluation of the potential for fraud