Chapter 4 accounting Homework videos

The individual or groups of individuals who are most able to override internal control features is (are): a. staff accountants b. top management c. support staff d. sales staff

top management

Some transactions of Blue River Company are given below. Indicate whether the transaction will be reported in the statement of cash flows. 1. On May 1, the company pays salaries to employees. 2. On May 8, the company purchases supplies worth $4,000, on account. 3. On May 21, the company borrows $10,000 from the bank to finance its short-term capital requirements. 4. On May 24, the company receives $1,000 cash from customers for services performed in April. 5. On May 28, the company pays $9,000 to purchase equipment.

1. Yes 2. No 3. Yes 4. Yes 5. Yes

Some transactions of Blue River Company are given below. Indicate whether the transaction is an operating, financing, or investing activity. 1. On May 1, the company pays salaries to employees. 2. On May 8, the company purchases supplies worth $4,000, on account. 3. On May 21, the company borrows $10,000 from the bank to finance its short-term capital requirements. 4. On May 24, the company receives $1,000 cash from customers for services performed in April. 5. On May 28, the company pays $9,000 to purchase equipment.

1. operating 2. operating 3. financing 4. operating 5. investing

Which of the following is an example of a detective control in a company? a. Electronic records are backed up daily, and require user-ID and password for access. B. Only senior managers are authorized to make purchases over a certain amount. c. Accounting personnel routinely reconciles the company's cash records with those of its bank to identify discrepancies. d. Concession supplies are kept in a locked room with access allowed only to authorized personnel.

Accounting personnel routinely reconciles the company's cash records with those of its bank to identify discrepancies.

During the year, Bernard Company's cash balance increased by $10,000. The sum of which totals reported on Bernard Company's statement of cash flows would also be equal to $10,000? a. Cash flows from Operating Activities b. Cash flows from Financing Activities c. Cash flows from Operating, Investing, and Financing Activities d. Cash flows form Operating and Financing Activities e. Cash flows from Operating and Investing Activities

Cash flows from Operating, Investing, and Financing Activities

The framework for designing an internal control system is provided by the a. Financial Accounting Standards Board. b. Committee of Sponsoring Organizations (COSO) of the Treadway Commission. c. Public Companies Accounting Oversight Board (PCAOB). d. Securities and Exchange Commission Act of 1934.

Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Which of the following can be used to assess the adequacy of a company's level of cash at the end of the period? a. Subtracting cash and cash equivalents from net income b. Dividing the sum of cash and cash equivalents by operating cash flows c. Dividing the sum of cash and cash equivalents by noncash assets d. Dividing operating cash flows by noncash assets

Dividing the sum of cash and cash equivalents by noncash assets

Which of the following is an example of a preventive control in a company? a. Management periodically determines whether the amount of physical assets of the company match the accounting records. b. Actual performance of individuals are routinely checked against their expected performance. c. The management evaluates the overall performance by comparing sales for the current year with sales for the previous year. d. Employees responsible for making cash disbursements are not in charge of cash receipts.

Employees responsible for making cash disbursements are not in charge of cash receipts.

Only the best internal control systems can completely eliminate financial misstatements. T or F

False

Which of the following is classified as part of the control environment? a. Formal procedures for reporting control deficiencies b. Identification and analysis of internal and external risk factors c. Overall ethical tone of the organization with respect to internal control d. Policies and procedures that help ensure that managements' directives are followed

Overall ethical tone of the organization with respect to internal control

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the a. Investor Protection Act. b. CPA Investigations Act. c. Sarbanes-Oxley Act. d. SEC Reforms Act.

Sarbanes-Oxley Act.

The ending balance in cash is reported in which financial statement(s)? a. The balance sheet and statement of cash flows b. The balance sheet only c. The balance sheet and income statement d. The statement of cash flows only

The balance sheet and statement of cash flows

Who is responsible for providing an opinion on management's assessment of internal control? a. The company's auditors b. SEC staff auditors c. Audit committee d. The CEO and CFO

The company's auditors

Who is responsible for providing an opinion on management's assessment of internal control? a. The company's auditors b. The CEO and CFO c. SEC staff auditors d. Audit committee

The company's auditors

Which of the following is an example of separation of duties in a good system of internal control? a. The individual who evaluates the employees may not hire employees. b. The individual who hires the employees may not manage the employees. c. The individual who receives the inventory does not have access to the accounting records. d. The individual who receives the inventory cannot count the inventory.

The individual who receives the inventory does not have access to the accounting records.

According to the provisions of the Sarbanes-Oxley Act, audit firms are not allowed to audit public companies whose chief executives worked for the audit firm and participated in that company's audit during the preceding year. T or F

True

Cash dividends paid to stockholders is an example of a financing activity. T or F

True

Revenue and expense events involving cash are classified as operating activities. T or F

True

The accountant at Zepha Consulting works with the manager authorized to make purchases in order to steal cash from the company. This is an example of collusion. T or F

True

Which of the following is not one of the categories of business activities reported in the statement of cash flows? a. accounting b. financing c. investing d. operating

accounting

The components of internal control are a. based on the ethical tone set by management. b. required by the SEC. c. required by the American institute of Certified Public Accountants. d. required by state law.

based on the ethical tone set by management.

A journal entry that affects a company's Statement of Cash Flows will include an inflow or outflow of _____.

cash

The asset most susceptible to fraudulent activity is ______.

cash

The asset that is most easily stolen and susceptible to fraud is _____.

cash

Amounts readily available to pay off debt or use in operations are considered cash, while highly liquid investments with a maturity date of 3 months or less are considered ____ _____.

cash equivalents

Currency, coins, and checking accounts are considered cash, whereas short-term highly liquid investments of 3 months or less are considered a. trading securities. b. restricted cash. c. liquid securities. d. cash equivalents.

cash equivalents

The accounting term for a situation where two or more people act in coordination to circumvent internal controls is ____.

collusion

When two or more persons work together to circumvent internal control procedures and commit a fraud, this is called ____

collusion or colluding

The ______ and ____ sets the overall ethical tone of the company with respect to internal control.

control environment

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission a. provided a framework for auditing internal control systems. b. preparing useful financial statements. c. designing fraud-proof accounting system. d. designing an internal control system.

designing an internal control system.

Controls designed to find errors or fraud that have occurred are referred to as ___ controls. a. proactive b. reactive c. detective d. preventive

detective

The two types of control procedures are preventive and _____.

detective

Which of the following is not an element of the fraud triangle? a. opportunity b. rationalization c. education d. motivation

education

The amount of cash in the balance sheet reflects the a. cash expected to be used in the following year. b. cash inflows to the company from selling goods and services. c. amount of cash spent during the period. d. ending cash on the balance sheet date.

ending cash on the balance sheet date

Internal control components are built on the foundation of the _____ tone established by top management in its control environment.

ethical or ethics

When a person intentionally deceives another person or company for personal gain, this is referred to as _____.

fraud or fraudulance

Separation of duties requires that a. the board of directors may not influence the decisions of the top managers. b. an employee procedures manual must be developed to describe duties. c. individuals who have physical responsibility for assets should not have access to accounting records. d. two employees may not work on the same project if they are related.

individuals who have physical responsibility for assets should not have access to accounting records.

An audit is a(n) example of a ____ control.

internal

Who has final responsibility for internal controls? a. The FASB b. The SEC c. Management d. Auditors

management

The sum of net cash flows from operating, investings, and financing activities reported in the statement of cash flows represents the: a. cash balance at the end of the current year b. cash balance at the beginning of the current year c. net increase or decrease in cash during the year

net increase or decrease in cash during the year

The cash flow category that is closely related to a company's profitability is cash from ______ activities.

operating

Sells goods to customers Sells stock to investors Purchase equipment

operating activity financing activity investing activity

Purchasing inventory from vendors signing a long-term promissory note Selling equipment

operating activity financing activity investing activity

Companies have the greatest ability to eliminate this element of fraud: a. opportunity b. rationalization c. motive

opportunity

The element of fraud which is easiest for companies to eliminate is _____.

opportunity

The three elements present in the fraud triangle are: a. opportunity b. greed c. motive d.rationalization e. revenge

opportunity, motive, rationalization

Controls designed to prevent errors or fraud that have occurred are referred to as ___ controls. a. preventive b. proactive c. reactive d. detective

preventive

Two types of control activities are Multiple choice question. a. preventive and detective controls. b. operating and investing controls. c. investor and creditor controls. d. asset and liability controls.

preventive and detective controls.

Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier? a. both are about the same b. Smith c. Jones

smith Because it is operating cash flows show more vulnerability

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's: (Select all that apply.) a. statement of stockholders' equity b. statement of cash flows c. income statement d. balance sheet

statement of cash flows Balance sheet

Because managers are entrusted with company resources by both lenders and owners, they are referred to as: a. investors b. trustees c. proprietors d. stewards

stewards

Because managers are entrusted with company resources by both lenders and owners, they are referred to as: a. trustees b. stewards c. investors d. proprietors

stewards

Managers who are entrusted with taking care of the assets of the company are referred to as Blank______ of the company's assets. a. stewards b. proprietors c. investors d. delegates

stewards

Which of the following are not included in cash? a. currency and coins b. cash in savings account c. Accounts receivable from customers d. Balance in checking accounts

Accounts receivable from customers

Which of the following items are not included in cash? a. Balance in checking accounts b. Accounts receivable from customers c. Cash in savings account d. Currency and coins

Accounts receivable from customers

After the passing of the Sarbanes-Oxley Act, auditors of public companies can perform nonaudit services, such as investment advising, for their clients. T or F

False

The corporate form of business is an entity separate from its owners. This means that corporate executives need not personally certify the company's financial statements and financial disclosures. T or F

False

When accountants make accidental errors in recording (or failing to record) transactions or in applying accounting rules, they have committed fraud. T or F

False

True or false: All companies are required to have an independent auditor assess the adequacy of their internal control procedures.

False because companies that are listed on stock exchanges must have their internal control procedures audited. Other companies may choose to have internal control audits.

True or false: Variability in operating cash flows is unimportant as long as the total cash flows over a three-year period is sufficiently positive.

False variability is usually associated with riskiness

Which of the following is classified as part of the control environment? a. Policies and procedures that help ensure that managements' directives are followed b. Identification and analysis of internal and external risk factors c. Formal procedures for reporting control deficiencies d. Overall ethical tone of the organization with respect to internal control

Overall ethical tone of the organization with respect to internal control

Why is it often easy for top level management to commit fraud? a. They can override the internal control system. b. Subordinates feel intimidated and may not report it. c. They know that the firm will not be audited. d. Fewer internal controls may be in place at that level.

They can override the internal control system Subordinates feel intimidated and may not report it Fewer internal controls may be in place at that level

The Sarbanes-Oxley Act applies to Multiple choice question. a. companies that are formed as partnerships. b. companies that are required to file with the SEC. c. any company organized in the United States. d. companies that operate internationally.

companies that are required to file with the SEC.

Which of the following items are included in cash? a. Accounts receivable from customers b. Currency and coins c. Notes receivable from customers d. Checks from customers e. Balance in checking accounts

currency and coins checks from customers balance in checking accounts

Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n) ______ _______.

current or short-term asset

Which of the following entries affect a company's cash flows? a. Debit equipment; credit notes payable b. Debit accounts receivable; credit revenue c. Debit rent expense; credit cash d. Debit supplies; credit cash

debit rent expense; credit cash debit supplies; credit cash

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as a. security controls. b. internal controls. c. corporate regulations. d. general controls. e. protective controls.

internal controls

The statement of cash flows is useful because a. it provides more accurate information than the balance sheet. b. it is more accurate in measuring net income for the period. c. it provides information on the company's ability to maintain long-term success. d. it is prepared on an accrual basis.

it provides information on the company's ability to maintain long-term success.

Identify cash equivalents from the listed items a. money market funds b. supplies c. Three-month Treasury bills d. accounts receivable e. prepaid rent

money market funds supplies

Internal control consists of plans to (Select all that apply.) a. report management errors to the police. b. report misuse of company assets to investors. c. provide accurate and reliable accounting information. d. safeguard company assets.

provide accurate and reliable accounting information. safeguard company assets

Strong internal control systems allow greater reliance by investors on: a. reported financial statements b. stock market performance c. continued success of a company

reported financial statements

Which of the following allows greater reliance by investors on reported financial statements? a. High liquidity reported on the balance sheet b. Strong internal control systems c. Increasing profitability of a company

strong internal control systems