Financial Chapter 4

Which one of the following is not a cash equivalent?

a. 180-day note issued by a local or state government b. 60-day corporate commercial paper c. 30-day certificate of deposit d. 90-day U.S. Treasury bill a

Which of the following is not one of the three areas for which internal control systems are intended to provide reasonable assurance?

a. Financial reporting has been done in compliance with all applicable laws and regulations b. Reliability of financial reporting c. Certification that all revenues and expenses have been properly recorded d. Company's operational activities are effective and efficient C

Which of the following is not generally an internal control activity?

a. Limiting access to computerized accounting records b. Establishing clear lines of authority to carry out specific tasks c. Reducing the cost of hiring seasonal employees d. Physically counting inventory in a perpetual inventory system C

Which one of the following would not appear on a bank statement for a checking account?

a. Outstanding checks b. Interest earned c. Service charges d. Deposits A

Which of the following is not one of the five categories of control activities?

a. Segregation of duties b. Clearly defined authority and responsibility c. Checks on recorded amounts d. Accrual accounting and the matching principle D

Which one of the following statements is true?

a. The person handling the cash should also prepare the bank reconciliation. b. Petty cash can be substituted for a checking account to expedite the payment of all disbursements. c. Sound internal control practice dictates that cash disbursements should be made by check, unless the disbursement is very small. d. Good cash management practices dictate that a company should maintain as large a balance as possible in its cash account. C

Cash management principles do not include

a. delaying payment of suppliers. b. earning the greatest return possible on excess cash. c. speeding up collection from customers. d. paying suppliers promptly. D

Which of the following is not one of the five components of internal control?

analysis of control procedures

What is the primary role of internal controls in managing a business?

b. To constrain subordinates' activities in order to prevent employees from deviating from the scope of their responsibilities and encouraging them to act in the best interest of the business.

Allowing only certain employees to order goods and services for the company is an example of what internal control procedure?

clearly defined authority and responsibility

High level cash management strategies include

delaying payment for suppliers

Deposits made by a company but not yet reflected in a bank statement are called

deposit in transit

The internal audit function is part of what element of the internal control system?

monitoring

The operating cycle is best described as the time between

purchase of goods for resale and collection of cash from customers.

Effective cash management and control includes all of the following except

purchase of stocks and bonds