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41) Which of the following is an attribute of the internal control procedure—competent, reliable, and
ethical personnel?
A) providing cross training to allow sales personnel to record revenue transactions
B) the need to train and supervise employees
C) monitoring of internal controls by external auditors
D) purchase of burglar alarms
42) Which of the following is an attribute of the internal control procedure—assignment of
responsibilities?
A) To validate their accounting records, a company should have an audit by an external accountant.
B) The company should separate the custody of assets from accounting.
C) The external auditors will monitor internal controls.
D) Each position has clearly assigned responsibilities.
43) Which of the following illustrates the internal control procedure—separation of duties?
A) Cashiers must not have access to accounting records.
B) External auditors will monitor internal controls.
C) Electronic devices must be installed to reduce theft.
D) The invoices and other documents must be pre-numbered.
44) Which of the following is included in the internal control procedure—documents?
A) Mandatory vacations will improve internal control.
B) Separate the custody of assets from accounting.
C) The invoices and orders must be pre-numbered.
D) A company should purchase a fireproof vault to protect legal documents.
45) Goldman Services hired a new clerk to keep custody of and maintain all the equipment in the
equipment yard. The clerk has not yet been adequately trained on the maintenance needs of the
equipment. Which internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
46) The controller at Business Services Consulting needs new computers for the accounting department.
However, there are no guidelines specifying whether the controller can approve purchases of office
equipment. Which internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
47) At Carlson Services, the cashier collects checks and cash from customers, and the junior accountant
records the transactions in the journal. The controller approves the journal entries and bank
reconciliations. The treasurer signs checks and approves contracts. Which internal control procedure is
exemplified in the above situation?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
48) At Radiant, Inc., the sales department is also responsible for recording cash transactions as it does not
have a separate accounting department. Which internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
49) Vaughan Services hires a new accountant to maintain its petty cash fund. Although the employee
possesses an accounting degree, he/she had been previously convicted of embezzlement. Which internal
control procedure needs to be addressed in this situation?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
50) City Advertising Services hired a new accounting manager. He signed a contract for a new accounting
information system, but his position did not specify whether he was authorized to do so or not. Which
internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
51) Which of the following is an issue that must be addressed in the internal controls for e-commerce?
A) burglar alarms
B) tone at the top
C) phishing expeditions
D) need for outside auditors
52) A(n) ________ is a device that enables members of a local network to access the network while
keeping nonmembers out of the network.
A) burglar alarm
B) firewall
C) fireproof vault
D) electronic sensor
53) Rearranging plain-text messages by a mathematical process is known as ________.
A) password
B) phishing
C) encryption
D) virus
54) For the following situation, state whether it represents a strength or weakness in internal control and
give the reason for your answer.
The bookkeeper opens the mail, makes the deposit, and makes the journal entries to record receipt of the
cash and checks.
55) For the following situation, state whether it represents a strength or weakness in internal control and
give the reason for your answer.
The movie theater has the following policy. Tickets are sold by the cashier. The ticket stubs are collected
by the ticket taker. The ticket stubs are stored in a locked box, and the accounting personnel match the
number of ticket stubs to the number of tickets sold.
56) For the following situation, state whether it represents a strength or weakness in internal control and
give the reason for your answer.
Fifth National Bank requires mandatory vacations and job rotation.
57) A system cannot be overcome or broken into if its internal controls are properly designed and
structured.
58) It is difficult and costly to plan controls that can prevent collusion.
59) Strict internal controls must be implemented, regardless of the cost.
60) Internal controls must always be judged in light of their costs versus their benefits.
61) Collusion involves two or more people working together to circumvent internal controls and defraud
a company.
62) Before any internal control procedure is initiated, which of the following questions must be primarily
addressed by a company?
A) Will this put an end to theft?
B) Is this the best security money can buy?
C) How much benefit will be derived from the cost of the procedure?
D) Will this prevent accounting errors?
63) Two or more people working together to circumvent internal controls and defraud a company is
known as ________.
A) encryption
B) firewall
C) collusion
D) separation of duties
1) All cash receipts should be deposited in the bank at the end of each week.
2) Companies receive cash either over the counter, through the mail, or by electronic funds transfer.
3) The security measures are the same for any type of cash receipts.
4) Which of the following is the basic internal control procedure with respect to cash receipts?
A) depositing all cash receipts in the bank shortly after the cash is received
B) requiring customers to pay with debit or credit cards
C) requiring the accountants to make the bank deposits
D) preventing collusion
5) A point-of-sale terminal provides control for over the counter cash receipts.
6) At the end of each day, the accountant proves the cash by comparing the cash in the drawer against the
point-of-sale terminal record of cash sales.
7) To help prevent theft by the sales clerk, at the end of each day, the manager proves the cash by
comparing the cash in the drawer against the cash register's record of cash sales.
8) To ensure that there is no collusion between the manager and sales clerks, the accounting department
employees deposit the cash in the bank and use the deposit slip to prepare the journal entry for cash
receipts and sales revenue.
9) Which of the following is NOT an appropriate internal control for cash receipts over the counter?
A) A receipt is issued for each transaction to ensure that each sale is recorded.
B) The store clerk deposits the cash in the bank.
C) At the end of the day, the manager proves the cash by comparing the cash in the drawer against the
machine's record of cash sales.
D) The cash draw opens after the store clerk enters a transaction.
10) Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts
over the counter?
A) A receipt is issued for each transaction to ensure that each sale is recorded.
B) At the end of the day, the sales clerk proves the cash by comparing the cash in the drawer against the
machine's record of cash sales.
C) The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue.
D) The store clerk deposits the cash in the bank.
11) A company which sells merchandise or services can receive cash from customers ________.
A) over the counter
B) by electronic funds transfer
C) through the mail
D) in any of the above forms
12) Which of the following is NOT an acceptable task for a retail store manager?
A) making the cash deposit at the bank
B) proving the cash by comparing the cash in the drawer against the point-of-sale terminal's record of
cash sales
C) using the point-of-sale terminal's tape to record the journal entry for sales revenue
D) overseeing the work of the sales clerks
