Accounting Chapter 4

can be compromised by management override can be circumvented by collusion increases the likelihood of early fraud detection

A good system of internal controls ______. Multiple select question. can be compromised by management override eliminates temptation for employees to commit fraud can be circumvented by collusion increases the likelihood of early fraud detection

General

A policy that "employees at all levels are required to fly coach" is an example of __________ authority.

specific

A policy that states "investment decisions are authorized at the division level, while hiring decisions are authorized at the departmental level" is an example of a(n) ________________ authorization

False

The SEC requires public companies to evaluate their internal control and to publish those findings with their filings. True False

it is best to train them to perform a variety of tasks

When training employees ______. it is best to train them to perform a variety of tasks the focus should be on a specific job in order to maximize productivity

using one person to approve a sales return and a different person to issue credit to the customer

An examples of separation of duties is ______. having two pilots complete the same check list using one person to approve a sales return and a different person to issue credit to the customer requiring pass code entry of two individuals to authorize the launch of a nuclear weapon having a personnel manager who is also in charge of payroll

procedures manual

Appropriate accounting processes should be documented in a(n) __________ __________ that is routinely updated.

postdated checks

Cash does not include ______. savings accounts without withdrawal penalties currency money orders postdated checks

rightful ownership of cash is difficult to prove it has universal appeal small quantities of cash can represent significant value

Cash must be subject to strict internal controls because __________. Multiple select question. it is the first asset shown on the balance sheet rightful ownership of cash is difficult to prove it has universal appeal small quantities of cash can represent significant value

performance evaluation

Employing a public accounting firm to conduct an audit is an example of ______. bonding employees assigning authority and responsibility performance evaluation correct physical control

keeping accounting records in a fireproof safe unannounced counts to verify the presence of company-owned equipment

Examples of physical controls include ______. Multiple select question. keeping accounting records in a fireproof safe unannounced counts to verify the presence of company-owned equipment using prenumbered documents with signatures for all important forms requiring employees to fly coach when traveling for business developing a procedures manual for employees to follow

General

Fill in the Blank Question Fill in the blank question. A policy that "employees at all levels are required to fly coach" is an example of ____________ authority.

able to perform tasks as expected able to rotate jobs

Hiring quality employees enhances internal controls because they are _________. Multiple select question. able to perform tasks as expected never going to act dishonestly able to rotate jobs properly trained for the job when hired

True

Human error is a common cause of internal control failure. True false

fidelity

Insurance that protects a company from losses caused by employee dishonesty is provided by a(n) ___________ bond

reliable financial reporting compliance with applicable laws and regulations safeguarding assets

Internal control includes ______. Multiple select question. reliable financial reporting compliance with applicable laws and regulations federal government loan guarantees safeguarding assets

physical

Keeping a record of the serial numbers of equipment along with name of the individual who is responsible for the equipment is an example of a(n) ______ control. physical specific administrative general

few people can objectively evaluate their own performance.

Performance evaluations are necessary because ________ they are required by SOX for all public companies they are required by generally accepted accounting principles few people can objectively evaluate their own performance

are used for all important documents should be simple and easy to use

Prenumbered forms ______. Multiple select question. do not need to allow for authorized signatures are used for all important documents should be simple and easy to use are mostly used to simplify recordkeeping, not prevent unauthorized use

invoices checks receiving reports purchase orders

Prenumbered forms are used for ______. Multiple select question. invoices checks receiving reports purchase orders employee time tickets

Control

Procedures such as segregation of duties, account reconciliations, and other practices that are designed to safeguard assets and enable an organization to prepare reliable financial statements are identified as _______________ activities in the COSO framework

makes it harder to cover up fraudulent activities

Requiring employees to take regular vacations enhances internal controls because it ______. makes it harder to cover up fraudulent activities gives employees the opportunity to learn other jobs forces customers to adapt to working with different employees creates fear among employees

signature

The bank account number and the signatures of the people authorized to sign checks is shown on a bank ______ card. administrative signature identification authorization

control environment

The integrity and ethical values of the company, including its code of conduct, involvement of the board of directors, and other actions that set the tone of the organization are features of the _______________ _____________ component of the COSO framework.

internal control

The process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations is called _____________ _____________

regular vacations should be required duties should be rotated periodically

To help prevent fraudulent employee activities from being covered up, _________. Multiple select question. those who authorize transactions should also record them regular vacations should be required only upper management should have custody of assets duties should be rotated periodically

seek recommendations from prior employers or educators perform background checks screen job applicants using interviews

To promote the hiring of employees with high levels of personal integrity, employers should ________. Multiple select question. seek recommendations from prior employers or educators only hire employees who are bonded perform background checks screen job applicants using interviews

the work of one employee acts as a check on the work of another employee collusion is necessary to commit fraud or theft

When duties are separated ______. Multiple select question. the work of one employee acts as a check on the work of another employee corruption is always deterred related duties can be performed by a single individual who is properly bonded collusion is necessary to commit fraud or theft

Keep all cash in one central location.

Which of the following is not an internal control procedure commonly used to safeguard cash? Keep all cash in one central location. Record cash receipts immediately. Give customers who pay with cash written receipts. Count the amount of cash on hand regularly.

Appropriate accounting procedures should be documented in a procedures manual. Periodic reviews should be conducted to ensure the procedure manual is being followed.

Which of the following statements are correct? Multiple select question. Appropriate accounting procedures should be documented in a procedures manual. Procedures manuals are generally ineffective in today's fast-paced environment. Once established, the accounting procedures manual should not be changed. Periodic reviews should be conducted to ensure the procedure manual is being followed