Chapter 12 MCQ
3. Which of the following types of fraud requires access to the accounts receivable master file? a. Lapping b. Kiting c. Theft of inventory d. None of the above
a
4. The CEO is concerned about the possibility of employees stealing inventory. In the formal language used for risk analysis, theft of inventory is referred to as a(n): a. risk b. exposure c. expected loss d. threat e. None of the above
d
5. For good internal control in an ERP system, sales staff should be permitted to: a. Adjust customer credit limits b. Issue credit memos c. Both of the above d. Neither of the above
d
6. Which of the following procedures, by itself, is most effective at preventing employees from stealing cash? a. Restrictively endorsing all checks from customers upon receipt b. Having someone who has no access to cash reconcile the bank accounts c. Sending monthly statements to customers d. Using lockboxes for customer remittances e. Creating invoices so that the bottom portion is to be returned as a remittance advice
d
8. Which of the following is an example of the type of fraud referred to as misappropriation of assets? a. embezzlement b. lapping c. inventory theft d. all of the above e. none of the above
d
10. For effective internal control, which of the following duties can the person who handles customer payments also perform? a. Issue credit memos b. Reconcile the bank account c. Maintain accounts receivable d. All of the above e. None of the above
e
2. Which of the following violates proper segregation of duties? a. The same person maintains both accounts receivable and accounts payable. b. The same person approves sales orders that exceed a customer's credit limit and processes and reconciles the bank account. c. The same person handles customer payments and has access to blank checks. d. All of the above combinations violate proper segregation of duties. e. None of the above combinations violate proper segregation of duties
e
1. Which of the following pairs of duties combines the functions of custody and authorization in a manner that would allow an employee to conceal the theft of a customer's payment? a. Handling cash receipts plus maintaining accounts receivable b. Writing checks plus reconciling the bank statement c. Handling cash receipts plus issuing credit memos d. All of the combinations involve custody and authorization in a manner that would enable an employee to conceal theft of a customer's payment e. None of the combinations involve the functions of custody and authorization in a manner that would enable an employee to conceal theft of a customer's payment
c
7. Which of the following combinations of duties can the same employee perform without violating the principle of segregation of duties? a. Shipping inventory and billing customers b. Issuing credit memos and maintaining accounts receivable c. Taking customer orders and checking inventory availability d. All three of the listed combinations can be performed by the same person without violating the principle of segregation of duties e. None of the three listed combinations should be performed by the same person because all three combinations violate the principle of segregation of duties
c
9. Which of the following controls would be most effective in mitigating the risk of inventory theft? a. Reconciling shipping documents to sales orders, picking lists and packing slips. b. Separating the functions of shipping and billing c. Documentation of all transfers of inventory between employees d. Use of lockboxes
c