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Chapter 5
1. The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.
a.
True
b.
False
2. The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording
transactions and preparing financial statements.
a.
True
b.
False
3. The Sarbanes-Oxley Act requires companies and their independent accountants to report on the effectiveness of the
Chapter 5
company's internal controls.
a.
True
b.
False
4. Employee fraud is the intentional act of deceiving an employer for personal gain.
a.
True
b.
False
5. All organizations face risks, and the assessment of these risks is necessary so that the objectives of internal control can
be achieved.
a.
True
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b.
False
6. The internal control environment is enhanced by the hiring and retention of competent, honest employees.
a.
True
b.
False
7. There are only two internal control objectives: to ensure accurate financial reports, and to ensure compliance with
applicable laws.
a.
True
b.
False
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8. Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control
procedure: separating operations, custody of assets, and accounting.
a.
True
b.
False
9. Adding a review of operations by an internal audit staff weakens internal control.
a.
True
b.
False
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10. Information and communication are essential elements of an organization's internal control.
a.
True
b.
False
11. Internal control is enhanced by combining the control of a transaction with the record-keeping function.
a.
True
b.
False
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12. Money orders are considered cash.
a.
True
b.
False
13. If a business has several bank accounts, it will have a separate record for each of them.
a.
True
b.
False
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14. A customer's check received in settlement of an account receivable is considered cash.
a.
True
b.
False
15. For a strong internal control system over cash, it is important to have the duties related to cash receipts and cash
payments divided among different employees.
a.
True
b.
False
Chapter 5
16. A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice
being paid.
a.
True
b.
False
17. A voucher is a written authorization to make a cash payment.
a.
True
b.
False
Chapter 5
18. A voucher system is an example of an internal control procedure over cash receipts.
a.
True
b.
False
19. A voucher is a form where pertinent data about a liability and the particulars of its payment are recorded.
a.
True
b.
False
Chapter 5
20. A voucher system is an example of an internal control procedure over cash payments.
a.
True
b.
False
21. In a computerized system, paid vouchers are transferred to a paid voucher file.
a.
True
b.
False
22. A voucher is the notification accompanying the check issued to a creditor that indicates the specific invoice being
paid.
a.
True
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b.
False
23. For efficiency of operations and better control over cash, a company should maintain only one bank account.
a.
True
b.
False
24. Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.
a.
True
b.
False
Chapter 5
25. The bank informs the depositor of bank service charges by including a credit memorandum with a monthly bank
statement.
a.
True
b.
False
26. Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.
a.
True
b.
False
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27. A credit memorandum received with a bank statement means the company's bank account has been increased.
a.
True
b.
False
28. In preparing a bank reconciliation, the amount of deposits in transit is deducted from the cash balance per bank.
a.
True
b.
False
Chapter 5
29. The bank section begins with the cash balance according to the bank statement and ends with the adjusted balance.
a.
True
b.
False
30. In preparing a bank reconciliation, the amount indicated by a debit memorandum for bank service charges is added to
the cash balance per books.
a.
True
b.
False
Chapter 5
31. In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor's records is deducted
from the cash balance per books.
a.
True
b.
False
32. The amount of the "adjusted balance" appearing on a bank reconciliation as of a given date is the amount that is shown
on the balance sheet for that date after all adjusting entries have been entered.
a.
True
b.
False
33. The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a
bank reconciliation.
a.
True
b.
False
34. All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.
a.
True
b.
False
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35. A bank reconciliation is an important part of the system of internal controls.
a.
True
b.
False
36. Outstanding checks are checks that have been issued but have not cleared by the bank.
a.
True
b.
False
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37. The bank reconciles its statement to the depositor's records.
a.
True
b.
False
38. The depositor reconciles the bank's statement to the depositor's records.
a.
True
b.
False
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39. A check for $456 was erroneously charged by the bank as $654. In order for the bank reconciliation to balance, you
must subtract $198 from the bank statement balance.
a.
True
b.
False
40. In preparing a bank reconciliation, the amount of deposits in transit is deducted from the cash balance per books.
a.
True
b.
False
41. In preparing a bank reconciliation, the amount of outstanding checks is deducted from the cash balance per books.
a.
True
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b.
False
42. In preparing a bank reconciliation, the amount indicated by a credit memorandum for a note receivable collected by
the bank is added to the cash balance per books.
a.
True
b.
False
43. In preparing a bank reconciliation, the amount indicated by a debit memorandum for bank service charges is deducted
from the cash balance per bank.
a.
True
b.
False
