ACG 3024 Chapter 4 Quiz

An audit is useful to financial statement users because it:

provides reasonable assurance that the financial statements do not have material misstatements.

At March 31, Cummins Co. had a balance in its cash account of $10,700. At the end of March the company determined that it had outstanding checks of $1,160, deposits in transit of $720, a bank service charge of $40, and an NSF check from a customer for $220. The true cash balance at March 31 is:

$10,700 - $45 - $220 = $10,440 Cash Balance - Bank Service Charge - NSF Check

Owen Company's unadjusted book balance at June 30 is $15,960. The company's bank statement reveals bank service charges of $140. Two credit memos are included in the bank statement: one for $1,650, which represents a collection that the bank made for Owen, and one for $240, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:

$15,960 - $140 + $1,650 + $240 = $17,710 Cash Balance - Service Charge + (2) credit memos

The April 30 bank statement for Trimble Corporation shows an ending balance of $35,649. The unadjusted cash account balance was $29,550. The accountant for Trimble gathered the following information: There was a deposit in transit for $4,488. The bank statement reports a service charge of $69. A credit memo included in the bank statement shows interest earned of $255. Outstanding checks totaled $11,571. The bank statement included a $1,170 NSF check deposited in April. What is the true cash balance as of April 30?

$35,649 + $4,488 - $11,571 = $28,566 Unadjusted bank balance + Deposits - Outstanding checks

On September 30, the bank statement of Fine Company showed a balance of $9,250. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: (1) deposits in transit amounted to $3,915 (2) outstanding checks amounted to $7,410 (3) a $630 check was incorrectly drawn on Fine's account (4) NSF checks returned by the bank were $930 (5) bank service charge was $35 (6) credit memo for $115 for the collection of one of the company's account receivable Based on the above information, the true cash balance was:

$9,250 + $3,915 - $7,410 + $630 = $6,385 Balance + Deposits - Outstanding Checks + Incorrect Drawn Check

Which of the following is not a generally recognized internal control procedure?

Customer service comment cards.

Which of the following statements accurately describes a fidelity bond?

Insurance that the company buys to protect itself from loss due to employee dishonesty.

Policies and procedures designed to reduce the opportunities for fraud are often called:

Internal controls.

A review of the bank statement and accounting records of the Blake Company revealed the following items: 1) Three outstanding checks 2) A debit memo showing a bank service charge 3) A deposit in transit 4) An NSF check written by one of Blake's customers 5) A certified check written by Blake 6) A credit memo reflecting interest revenue earned by Blake Which of the item(s) would be added to the unadjusted bank balance to determine the true cash balance?

Item number 3.

Which of the following is not a component of the fraud triangle?

Reliance.

Which internal control procedure addresses the idea that the likelihood of employee fraud or theft is reduced if collusion is required to accomplish it?

Separation of duties.

The most favorable audit opinion that a company can receive is a(n):

Unqualified opinion.

In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. In preparing the bank reconciliation, this deposit in transit should be:

added to the unadjusted bank balance.

Which of the following would not require the company to make an adjustment to its books?

an error in which the bank charged the company $83 for a check that had been written by another account holder.

In preparing the April bank reconciliation for Oscar Company, it was discovered that on April 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. The correction the error of this error would increase:

cash and decrease delivery expense by $9.

In a bank reconciliation, a customer's NSF check included with the bank statement is:

deducted from the company's cash balance to get the true cash balance.

In a company's bank reconciliation, an outstanding check is a check that:

has been issued by the company but has not been presented to the bank for payment.

The bank statement for Tetra Company contained the following items: a bank service charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had outstanding checks of $100 and a deposit in transit of $300. The entry to record the customer's NSF check will:

increase the Accounts Receivable balance and decrease the Cash account balance.