Cornett Chapter 4

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

Accrual accounting and the matching principle

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

Certification that all revenues and expenses have been properly recorded

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

Deposits in transit.

T/F An accounting system must be computerized in order to ensure the company has proper internal control.

False

T/F If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary.

False

T/F On a bank reconciliation, outstanding checks are added to the cash balance per the bank statement.

False

T/F The best response to an employee caught stealing from the company is to say, "Don't ever let me catch you doing that again!"

False

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

Prepare tax returns

Which of the following procedures is not part of the preparation of a bank reconciliation for a checking account?

Reversing all the transactions recorded on the company's records that do not yet appear on the bank statement.

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

To place boundaries around employees' activities in order to prevent them from deviating from prudent and effective processes and procedures that are in the best interests of the business.

T/F A debit memo may be issued in the monthly bank statement in order for the bank to notify a company that a service charge has been assessed on the company's account.

True

T/F As part of a sound system of internal controls, all disbursements (with the exception of petty cash) should be made by check.

True

T/F Internal control over financial reporting is concerned with ensuring the reliability of the financial statements.

True

T/F The stronger the system of internal control, the higher the accuracy of the company's accounting records and financial reports.

True