ACCTG 320 Final MC Questions

12) ________ controls prevent, detect and correct transaction errors and fraud. A) Application B) Detective C) General D) Preventive

A

1) A control procedure designed so that the employee that records cash received from customers does not also have access to the cash itself is an example of a(n) A) preventive control. B) detective control. C) corrective control. D) authorization control.

A

2) At a movie theater box office, all tickets are sequentially prenumbered. At the end of each day, the beginning ticket number is subtracted from the ending number to calculate the number of tickets sold. Then, ticket stubs collected at the theater entrance are counted and compared with the number of tickets sold. Which of the following situations does this control detect? A) Some customers presented tickets purchased on a previous day when there wasn't a ticket taker at the theater entrance (so the tickets didn't get torn.) B) A group of kids snuck into the theater through a back door when customers left after a show. C) The box office cashier accidentally gives too much change to a customer. D) The ticket taker admits his friends without tickets.

A

2) Which of the following is the greatest risk to information systems and causes the greatest dollar losses? A) human errors and omissions B) physical threats such as natural disasters C) dishonest employees D) fraud and embezzlement

A

3) Which of the following is an example of a preventive control? A) approving customer credit prior to approving a sales order B) reconciling the bank statement to the cash control account C) counting inventory on hand and comparing counts to the perpetual inventory records D) Surprise audits of petty cash accounts

A

4) Independent checks on performance include all the following except A) data input validation checks. B) reconciling month end totals of # sales transactions with # of BOL's. C) preparing a trial balance report. D) supervisor review of journal entries and supporting documentation.

A

4) Perpetrators of theft of company assets typically exhibit all the following characteristics except that they A) attempt to return or pay back stolen amounts soon after the initial theft, but find they are unable to make full restitution. B) use trickery or lies to gain the confidence and trust of others at the organization they defraud. C) become bolder and more greedy the longer the theft remains undetected. D) begin to rely on stolen amounts as part of their income.

A

5) One of the objectives of the segregation of duties is to A) make sure that different people handle different parts of the same transaction. B) ensure that no collusion will occur. C) make sure that different people handle different transactions. D) achieve an optimal division of labor for efficient operations.

A

5) SAS No. 99 requires that auditors A) plan audits based on an analysis of fraud risk. B) detect all material fraud. C) alert the Securities and Exchange Commission of any fraud detected. D) take all of the above actions.

A

6) According to The Sarbanes-Oxley Act of 2002, the audit committee of the board of directors is directly responsible for A) hiring and firing the external auditors. B) performing tests of the company's internal control structure. C) certifying the accuracy of the company's financial reporting process. D) overseeing day-to-day operations of the accounting department.

A

7) Go-Go Corporation, a publicly traded company, has three brothers who serve as President, Vice President of Finance and CEO. This situation A) increases the risk associated with an audit. B) must be changed before your audit firm could accept the audit engagement. C) is a violation of the Sarbanes-Oxley Act. D) violates the Securities and Exchange Act.

A

9) Which of the following statements about internal environment is false? A) Management's attitudes toward internal control and ethical behavior have only minimal impact on employee beliefs or actions. B) Supervision is especially important in organizations that cannot afford elaborate responsibility reporting or are too small to have adequate segregation of duties. C) An overly complex or unclear organizational structure may be indicative of more serious problems. D) A written policy and procedures manual is an important tool for assigning authority and responsibility.

A

A balance sheet can be prepared by reference to: a. post-closing trial balance d. source documents b. subsidiary ledgers e. none of the above c. general and special journals

A

In a cash receipts system, which of the following controls will best ensure that all receipts received are properly recorded? a. Mailing monthly statements to customers b. Requiring accounting personnel to receive checks from customers c. Independently verifying that all recorded receipts appear on the prelist d. Footing the prelist e. Operating an effective accounting system for the underlying sales

A

In determining cost of goods sold under the periodic inventory method, which account is not affected? a. sales discounts d. freight-in b. purchase returns and allowances e. inventory c. purchase discounts

A

The clerk who opens mail is assigned responsibility for preparing a document which identifies all cash collections received in the mail for a given day. This document is called: a. remittances prelist form d. voucher b. receiving report e. collection authorization form c. accounts receivable subsidiary record

A

The general journal is used to: a. post all accounting entries not posted in other individual journals. b. post all accounting entries. c. post all accounting entries not involving cash. d. post only month end adjusting journal entries. e. post only year end adjusting journal entries.

A

The overall objective of the Systems Understanding Aid is to: a. help aid in the understanding and visualization of the entire accounting process. b. demonstrate a typical manual accounting system. c. introduce accounting flowcharts. d. introduce actual accounting documents. e. demonstrate a typical computerized accounting system.

A

Using prenumbered sales invoices is the primary control procedure for a. ensuring that all sales transactions are recorded. b. ensuring that all recorded sales transactions are valid. c. ensuring that all recorded sales transactions are accurate. d. both a and c. e. both b and c.

A

Which is the most important assertion relating to cash receipts? a. All amounts received are properly recorded. b. All amounts received relate to actual sales. c. All amounts received are properly disclosed in the footnotes of the financial statements. d. All amounts received are recorded in the same period in which the sale occurred. e. All amounts received are from actual customers.

A

Which of the following best describes lapping? A) Applying cash receipts to a different customer's account in an attempt to conceal previous thefts of cash receipts. B) Inflating bank balances by transferring money among different bank accounts. C) Increasing expenses to conceal that an asset was stolen. D) Stealing small amounts of cash, many times over a period of time.

A

Which of the following reconciling items on a bank reconciliation require an adjustment to the balance of the cash account? a. A monthly service charge fee b. Outstanding checks c. Deposits-in-transit d. Errors by the bank e. All of the above require adjustment

A

Which of the following sequence of steps in the accounting process is correct? a. Prepare records, record in journals, post to ledgers, and prepare unadjusted trial balance b. Prepare records, post to ledgers, record in journals, and prepare unadjusted trial balance c. Prepare records, prepare unadjusted trial balance, record in journals, and post to ledgers d. Prepare records, record in journals, prepare unadjusted trial balance, and post to ledgers e. Record in journals, post to ledgers, prepare records, and prepare unadjusted trial balance

A

Why is the periodic inventory method used instead of the perpetual method for some companies? a. the record keeping costs are lower b. inventory is physically counted less frequently for the periodic method c. the periodic method provides more detailed information about shrinkage d. all of the above e. none of the above

A

10) One reason why many organizations do not adequately protect their systems is because A) control problems may be overestimated by many companies. B) management sees internal controls as an unnecessary, non-value added expense. C) control technology has not yet been developed. D) all of the above

B

13) The primary purpose of the Foreign Corrupt Practices Act of 1977 was A) to require corporations to maintain a good system of internal control. B) to prevent the bribery of foreign officials by American companies. C) to require the reporting of any material fraud by a business. D) All of the above are required by the act.

B

16) Personnel policies such as background checks, mandatory vacations, and rotation of duties tend to deter A) unintentional errors. B) employee fraud or embezzlement. C) fraud by outsiders. D) disgruntled employees.

B

3) Most fraud perpetrators are insiders because A) insiders are more dishonest than outsiders. B) insiders know more about the system and its weaknesses than outsiders. C) outsiders are more likely to get caught than insiders. D) insiders have more need for money than outsiders.

B

36) Tom's Construction Services does home remodeling and repair. All employees are bonded (bonded = insured in case an employee does commits theft) so the firm's risk exposure to employee fraud is A) reduced. B) shared. C) avoided. D) accepted.

B

A document prepared at the time of shipment indicating the description of the merchandise, the quantity shipped and other relevant data. It is a written contract of the receipt and shipment of goods between the seller and the carrier. This document is a: a. remittance advice d. receiving report b. bill of lading e. sales order c. purchase requisition

B

A document prepared in the sales department of most firms for recording the description, quantity and related information for goods purchased by their customers is called a: a. customer order d. purchase order b. sales order e. purchase requisition c. sales invoice

B

A document used to report to the federal government income taxes (federal income taxes and F.I.C.A.) withheld from wages of employees is called a: a. W-2 form d. earnings record b. Form 941 e. Form 1040 c. deduction authorization form

B

An auditor is interested in testing whether a sample of sales to customers in the current year have been recorded. In this case, the auditor would most likely select a sample from which source? a. customer orders b. sales invoices c. entries in sales journal d. entries in the cash disbursements journal e. the accounts receivable subsidiary ledger

B

For the most effective and efficient control environment, payments for supplies purchases should be signed by a. the president of the company. b. the manager of accounts payable. c. the treasurer of the company. d. the requisitioner of the supplies. e. the controller of the company.

B

If the accountant was asked by management to determine the cost of inventory purchases during the year from a particular vendor, he would most likely examine which of the following to arrive at the answer: a. purchases journal b. accounts payable subsidiary ledger c. chronological file of purchase orders d. perpetual inventory records e. cash disbursements journal

B

If you received a request from a customer who wanted to know how much they owed, you would go to the: a. accounts receivable - general ledger account b. accounts receivable - subsidiary ledger c. sales journal d. sales invoice file e. sales department manager

B

In order to maintain controls over cash receipts, cash is typically deposited _____, while a bank reconciliation is performed _____. a. daily, weekly b. daily, monthly c. weekly, monthly d. monthly, daily e. weekly, weekly

B

Interpret the following credit terms: 2/10, Net 30. a. a 10 percent discount can be taken if the balance is paid within 2 days; otherwise, the balance is due in 30 days. b. a 2 percent discount can be taken if the balance is paid within 10 days; otherwise, the balance is due in 30 days. c. 20 percent of the balance is due in 30 days. d. 20 percent of the balance is due upon receipt, with the remaining balance due in 30 days. e. a 20 percent discount can be taken if the balance is paid with 30 days.

B

The basic source document which is used for recording a credit sale is: a. bill of lading b. sales invoice c. customer order form d. monthly billing statement e. debit memo

B

To determine how many of a particular inventory item you have on hand at any particular time, you would: a. examine the periodic inventory record for the item. b. examine the perpetual inventory record for the item. c. examine the monthly postings to the purchase account. d. examine the total in the purchase account for the year. e. examine the individual vendor's invoices for the particular item purchased in the current year.

B

What document does a customer receive when goods are returned? a. purchase order d. receiving report b. credit memo e. bill of lading c. debit memo

B

What is a payroll journal? a. a place where the names, social security numbers, pay rates, exemptions, withholding information, etc., are kept by the personnel department b. a special journal where payroll hours, dollars and deductions are accumulated for subsequent posting to the general ledger accounts c. a list of all employees on the payroll d. the clerical window where paychecks are picked up e. a list of employees validated by department foremen for payment in the current period

B

When processing the payment from a customer on an accounts receivable, the accountant needs at his disposal all of the following except: a. deposit slip d. cash receipts journal b. sales invoice e. all of the above are needed c. accounts receivable subsidiary ledger

B

Which of the following statements about closing entries is false? a. Closing entries are prepared only at the end of the organization's year. b. If there has been a net loss for the year, the Income Summary account is closed by a debit. c. The total debits and total credits must be equal for each closing entry. d. Every revenue and expense account must be closed out to zero. e. Closing entries are prepared after all transactions and adjusting entries have been prepared and posted to the general ledger.

B

Which, if any, of the following is not a reason for preparing an accounts receivable aged trial balance? a. Reconcile the control and subsidiary accounts. b. Display activity (cash receipts and sales) for each individual account. c. Show in a convenient format a listing of accounts receivable for management review. d. Provide information about the adequacy of the allowance for uncollectible accounts. e. All of the above are reasons for preparing an accounts receivable aged trial balance.

B

17) The amount of risk a company is willing to accept in order to achieve its goals and objectives is A) Inherent risk B) Residual risk C) Risk appetite D) Risk assessment

C

18) Petty cash is disbursed by Fred Haynes in the Cashier's Office. He also maintains records of disbursements, places requests to the Finance Department to replace expended funds, and periodically reconciles the petty cash balance. This represents a(an) ________ segregation of duties. A) effective B) ideal C) ineffective D) limited

C

7) Which characteristic of the fraud triangle relates to excuses that perpetrators use to justify their illegal behavior? A) pressure B) opportunity C) rationalization D) concealment

C

8) Which of the following will not reduce the likelihood of an occurrence of fraud? A) encryption of data and programs B) use of forensic accountants C) adequate insurance coverage D) required vacations and rotation of duties

C

9) One fraudulent scheme covers up a theft by creating cash through the transfer of money between banks. This is known as A) lapping. B) misappropriation of assets. C) kiting. D) concealment.

C

A client's accounting records are unfamiliar to a new auditor. Where would a new auditor go to learn the names and numbers of the accounts being debited and credited in the transactions. a. general journal d. internal control flowcharts b. general ledger e. inquire of the client c. chart of accounts

C

A document frequently used by organizations to establish a formal means of recording and controlling acquisitions. It is the basis not only for recording acquisitions in the journal but also for making cash disbursements. This document is called: a. invoice d. statement b. check e. subsidiary ledger c. voucher

C

A document indicating a reduction in the amount due from a customer because of returned goods or an allowance granted is called a: a. debit memo c. credit memo b. sales return and allowances d. sales invoice journal e.uncollectible account authorization

C

A place where gross pay, withholdings, and net pay are recorded for all employees. The amounts are normally totaled and posted to the general ledger monthly. The above is called a: a. personnel record d. employee time card b. labor distribution report e. perpetual employee record c. payroll journal

C

A remittance advice is used to: a. send or receive billing for asset or service b. ship or receive asset or service c. pay or receive cash d. authorize a transaction e. record or issue order to sell, buy or employ

C

An arrow with a dotted line ( ------>) in a systems flowchart indicates which of the following? a. the direction of processing or data flow d. an on-page connector b. a decision is to be made e. an off-page connector c. information flow only, no document flow

C

Benefits of the perpetual inventory method include all but which of the following: a. provides close control over the actual goods on hand b. provides a check on the accuracy of cost of goods sold c. lower record-keeping costs than under the periodic method d. provides a measure of losses through theft and spoilage e. provides up-to-date information about the quantity and dollar value of goods on hand

C

Time cards alone can be used by the payroll department to do which of the following? a. keep track of wage and salary information for each employee b. calculate net pay for each employee for each time period c. keep track of the hours worked by each employee for each time period d. calculate gross by for each employee for each time period e. calculate withholdings for each employee for each pay period

C

When a company receives a check in the mail in payment of an account receivable, the first recording of information about the collection is in the: a. accounts receivable c. cash receipts journal subsidiary ledger d. general journal b. receiving report e. check register

C

Which of the following statements is false? a. The perpetual inventory method requires that cost of goods sold be calculated for each sale. b. Perpetual inventory records reflect the quantity of inventory on hand at any point in time. c. If perpetual inventory records have been historically accurate, a physical inventory count can be omitted in a given year. d. Record-keeping errors can cause discrepancies between perpetual and physical count quantities. e. Significant differences between the physical count and perpetual records should be investigated.

C

Which transaction would not affect perpetual inventory records? a. sale of merchandise d. sales returns b. purchase of merchandise e. purchase returns c. sales discounts taken

C

Your company purchased merchandise from the "X" Corporation. As the "gopher" person in your company, you picked up the merchandise as you delivered the order to buy. You paid for the merchandise instantly with one of your company's checks. Where would this transaction be recorded first by your company? a. purchase journal d. general journal b. accounts payable subsidiary ledger e. general ledger c. cash disbursements journal

C

6) Which of the following is an opportunity that could contribute to employee fraud? A) an employee's spouse loses their job B) an employee suddenly acquires lots of personal credit cards C) an employee is upset that he was passed over for a promotion D) close association with suppliers or customers

D

11) Accountants must try to protect the AIS from threats. Which of the following would be a measure that should be taken? A) Take a proactive approach to eliminate threats. B) Detect threats that do occur. C) Correct and recover from threats that do occur. D) All of the above are proper measures for the accountant to take.

D

14) Which of the following would be considered a "red flag" for most companies? A) Management takes undue business risks to achieve its objectives. B) Management attempts to manipulate performance measures such as net income. C) Management pressures employees to achieve results regardless of the methods. D) All of the above.

D

15) The audit committee is responsible for A) overseeing the internal control structure. B) overseeing the financial reporting process. C) working with the internal and external auditors. D) All of the above are responsibilities.

D

8) Which of the following suggests a possible weakness in a company's internal environment? A) The audit committee regularly meets with the external auditors. B) The Board of Directors is primarily independent directors. C) The company has an up-to-date organizational chart. D) Formal employee performance evaluations are prepared every three years.

D

A document shown in a systems flowchart can: a. come from a source outside the company. b. be prepared by the department being described in the flowchart. c. be received from a department not shown in the flowchart. d. all of the above e. b or c only

D

Adjusting journal entries are prepared for which of the following? a. record depreciation expense b. adjust payroll expense for wages earned but not yet paid c. record an inventory purchase d. a and b only e. all of the above

D

An auditor has as his or her objective determining that sales transactions are recorded in the proper period. The document he or she will be most interested in is: a. sales invoice d. bill of lading b. monthly billing statement e. customer order form c. cash receipts journal

D

An auditor is interested in testing to see whether all items purchased over $500 were properly capitalized. In this case, the auditor would most likely select a sample from which source? a. the fixed asset subsidiary ledger b. the sales journal c. the general journal d. the purchases journal e. the accounts payable subsidiary ledger

D

Closing entries are used to zero-out accounts that appear on which of the following statements: a. the income statement d. a and b only b. the statement of retained earnings e. a, b and c c. the balance sheet

D

The purpose of a bank reconciliation is to: a. make sure the bank hasn't made a mistake b. make sure our cash bookkeeper hasn't made a mistake c. to make sure all cash which our company received got deposited d. to identify the differences between the bank balance per bank statement and our balance per books e. to show how much money our company has at any point in time

D

The trial balance worksheet does not provide information sufficient to: a. compute net income b. prepare a balance sheet c. prepare a statement of retained earnings d. the trial balance worksheet is sufficient for all of the above purposes e. the trial balance worksheet is not sufficient for any of the above purposes

D

When a customer of a company inquires about the amount which the customer owes the company, the clerk handling the question would go to the: a. accounts receivable general ledger d. accounts receivable subsidiary ledger b. original copy of the monthly statement e. customer service department c.sales journal

D

Which of the following documents and records is not required to prepare a reconciliation? a. prior month's bank reconciliation d. prior month's bank statement b. cash balance per general ledger e. cash disbursements journal c. cash balance per bank

D

Which of the following documents originates outside the company? a. purchase order d. vendor invoice b. cash sale invoice e. bill of lading c. employee time card

D

Which of the following is not adjusted as an accrual by a Company at the end of the year? a. Taxes payable d. Accounts payable b. Allowance for uncollectible accounts e. Accumulated depreciation c. Interest payable

D

Which of the following transactions would not result in an entry to the accounts receivable subsidiary ledger? a. charge sale d. recording provision for doubtful b. write-off of bad debt accounts c. sales return e. cash receipts

D

A document that accompanies the bill mailed to the customer and can be returned to the seller with the cash payment is called a: a. statement d. cash receipts memo b. voucher e. remittance advice c. collection invoice

E

A document that indicates such things as the description and quantity of goods and services received, the price including freight, the cash discount terms and the date of billing. It is an essential document because it specifies the amount of money owed for an acquisition. This document is a: a. purchase requisition d. sales order b. sales invoice e. vendor invoice c. purchase order

E

In the cash disbursements cycle, the vendor invoice is marked paid when a check is issued in order to: a. file the invoice alphabetically. b. make the necessary entry in the cash disbursements journal. c. indicate that the purchase is a fixed asset acquisition. d. indicate that the purchase has an approved purchase order. e. avoid duplicate payment of the invoice.

E

The pre-closing trial balance contains all information necessary to prepare which of the following? a. the statement of cash flows d. b and c only b. the statement of retained earnings e. a, b and c c. the income statement

E

What can the fixed asset subsidiary ledger be used to determine? a. accumulated depreciation for a particular asset b. the age of an asset c. the estimated useful life of an asset d. a and c only e. a, b and c

E

What does it mean to "cancel" a vendor's invoice? a. Writing "void" on an invoice that contains a mistake to prevent a Company from billing a customer more than once. b. Crossing out information on a vendor's invoice for goods not received to prevent payment for such goods. c. Sending an invoice back to the vendor along with the goods ordered when a credit memorandum is desired by the Company. d. Contacting a vendor prior to receiving goods in order to cancel a previous order. e. Writing "paid" on a vendor invoice when making a payment to prevent an invoice from being paid more than once.

E

What is the normal sequence of recording a transaction where inventory was acquired? a. purchase order, purchases journal, general journal, general ledger b. purchases journal, purchase order, general journal, general ledger c. purchase order, general journal, purchases journal, general ledger d. purchases journal, purchase order, general ledger e. purchase order, purchases journal, general ledger

E

When estimating uncollectible accounts, which of the following would be least useful? a. Past experience b. Industry experience c. Economic indicators d. Current-year aging report e. Sales forecasts

E

Which items in the following list are required for the preparation of a proper bank reconciliation? I. Bank statement V. Prior month's bank reconciliation II. Cash receipts journal VI. Cash disbursements journal III. Sales journal VII. Accounts payable trial balance IV. General ledger a. I, II, III, V, VI d. I, II, V. VI b. I, II, III, IV, V, VI e. I, II, IV, V, VI c. I, II, IV, V, VI, VII

E

Which of the following are not shown on a fixed asset subsidiary ledger? a. estimated life b. accumulated depreciation balance c. cost of the asset d. final disposition of the asset e. all of the above are shown on the fixed asset subsidiary ledger

E

Which of the following errors would not cause the trial balance to be out of balance? a. failing to post part of a journal entry b. posting a debit as a credit c. incorrectly calculating the balance of an account d. omitting an account from the trial balance e. failing to record a transaction

E

Which of the following is subtracted from an employee's gross pay: a. federal unemployment tax b. state unemployment tax c. local unemployment tax d. employer portion of FICA tax e. federal income tax withholding

E

Which of the following items on a bank reconciliation would require an adjusting journal entry? a. another company's check deducted by the bank in error b. deposits in transit c. outstanding checks d. another company's deposit credited by the bank in error e. an error by the company bookkeeper in recording a cash disbursement

E

Which of the following transactions would never be recorded in a cash disbursements journal? a. purchase of inventory d. payment of shipping charges b. sales return e. all of the above could be recorded c. payment of payroll withholdings through the CD journal

E