Finance Chapter 6 Cpas The Companys Internal Audit Staff The Audit Committee The Companys Board

Document Type
Test Prep
Book Title
Financial Accounting: The Impact on Decision Makers 10th Edition
Authors
Curtis L. Norton, Gary A. Porter
Chapter 6: Cash and Internal Control
83. Border Company’s cash account had a balance of $962 on August 31. This included a bank deposit of $87 that was in
transit on the 31st. The August 31 bank statement contained the following information:
Bank Statement Balance
$1,089
NSF check
16
Bank Service Charge
7
Collection of notes receivable
68
Border also had checks outstanding of $169. What is Border’s adjusted cash balance at August 31?
a.
$ 920
b.
$ 940
c.
$1,007
d.
$1,089
ANSWER:
c
RATIONALE:
$1,089 (Bank Balance) + $87 (Deposit in transit) $169 (Outstanding checks) = $1,007, or
$962 (Book Balance) + $68 (Note Receivable) $16 (NSF Check) $7 (Service Charge) =
$1,007
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
84. The accountant for Lola Corp. was preparing a bank reconciliation as of February 28, 2016. The following items were
identified:
Lola’s book balance
Outstanding checks
Interest earned on checking accounts
Customer’s NSF check returned by the bank
There was an error in recording a customer’s check as the check was recorded by Lola as $110, but the correct amount of
$101 was recorded by the bank.
Lola’s adjusted cash balance at February 28, 2016 is
a.
$23,591
b.
$35,641
c.
$35,659
d.
$47,691
ANSWER:
b
RATIONALE:
$35,900 (Book balance) $9 (Transposition error) + $75 (Interest) $325 (NSF check) =
$35,641
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
85. Gentech Corp. prepared a bank reconciliation as of June 30, 2016. The following items were identified:
Gentech’s bank balance
Deposits in transit
Outstanding checks
Bank service charges
Customer's NSF check returned by the bank
Gentech’s adjusted cash balance at June 30, 2016 is
a.
$13,800
b.
$14,100
c.
$14,000
d.
$14,300
ANSWER:
c
RATIONALE:
$14,300 (Bank Balance) + $1,000 (Deposit in Transit) $1,300 (Outstanding Checks) =
$14,000
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
86. Taylor Corp. identified the following data in preparing a bank reconciliation on October 31, 2016.
Bank statement balance
$29,600
Taylor’s book balance (before adjustments)
?
Outstanding checks
3,100
NSF checks
300
Service charges
200
Deposits in transit
2,200
Interest earned on checking account
100
How much is Taylor’s adjusted cash balance on October 31, 2016?
a.
$28,700
b.
$29,100
c.
$28,300
d.
$29,600
ANSWER:
a
RATIONALE:
$29,600 (Bank Statement Balance) + $2,200 (Deposits in Transit) $3,100 (Outstanding
Checks) = $28,700
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
87. Taylor Corp. identified the following data in preparing a bank reconciliation on October 31, 2016.
Bank statement balance
$29,600
Taylor’s book balance (before adjustments)
?
Outstanding checks
3,100
NSF checks
300
Service charges
200
Deposits in transit
2,200
Interest earned on checking account
100
What is the net amount of the adjustments to Taylor’s cash balance as a result of the bank reconciliation?
a.
No amounts need to be recorded
b.
$400 increase
c.
$400 decrease
d.
$900 decrease
ANSWER:
c
RATIONALE:
$100 (Interest) $300 (NSF checks) $200 (Service charges) = ($400)
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
88. The Dinho Corporation identified the following data when preparing their April bank reconciliation:
Bank statement balance
$45,000
Dinho’s book balance (before adjustments)
?
Outstanding checks
4,500
NSF checks
1,400
Service charges
300
Deposits in transit
5,000
Interest earned on checking account
25
In addition, Dinho incorrectly recorded a deposit in its books in the amount of $1,000. The correct amount was recorded
by the bank as $1,200.
What is the adjusted cash balance at the end of April?
a.
$44,300
b.
$45,500
c.
$45,000
d.
$45,700
ANSWER:
b
RATIONALE:
$45,000 (Bank Statement balance) + $5,000 (Deposits in Transit) $4,500 (Outstanding
Checks) = $45,500
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
89. The Dinho Corporation identified the following data when preparing their April bank reconciliation:
Bank statement balance
$45,000
Dinho’s book balance (before adjustments)
?
Outstanding checks
4,500
NSF checks
1,400
Service charges
300
Deposits in transit
5,000
Interest earned on checking account
25
In addition, Dinho incorrectly recorded a deposit in its books in the amount of $1,000. The correct amount was recorded
by the bank as $1,200.
What is the net amount of the adjustment to Dinho’s cash balance as a result of the bank reconciliation?
a.
$1,675 increase
b.
$1,700 increase
c.
$1,675 decrease
d.
$1,475 decrease
ANSWER:
d
RATIONALE:
$200 (Error correction) + $25 (Interest) $300 (Service charges) $1,400 (NSF checks) =
($1,475)
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
90. Use the following data to answer the question presented below for Raines Corp.'s preparation of a bank reconciliation
on October 31, 2016:
Bank statement balance
$30,700
Raines’ book balance (before adjustments)
?
Outstanding checks
4,200
NSF checks
400
Service charges
300
Deposits in transit
3,100
Interest earned on checking account
100
What is the adjusted cash balance on October 31, 2016?
a.
$29,600
b.
$30,100
c.
$30,200
d.
$30,700
ANSWER:
a
RATIONALE:
$30,700 (Bank statement balance) $4,200 (Outstanding checks) + $3,100 (Deposits in
transit) = $29,600
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
91. Use the following data to answer the question presented below for Raines Corp.'s preparation of a bank reconciliation
on October 31, 2016:
Bank statement balance
$30,700
Raines’ book balance (before adjustments)
?
Outstanding checks
4,200
NSF checks
400
Service charges
300
Deposits in transit
3,100
Interest earned on checking account
100
What is the net amount of the increase or decrease in Raines cash balance which must be recorded as a result of the
adjustments identified by the bank reconciliation?
a.
$100 decrease
b.
$300 decrease
c.
$400 decrease
d.
$600 decrease
ANSWER:
d
RATIONALE:
$100 (Interest earned) $400 (NSF checks) $300 (Service charges) = ($600)
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
92. The debit balance in Cash Short and Over at the end of an accounting period is reported as
a.
an expense on the income statement
b.
income on the income statement
c.
an asset on the balance sheet
d.
a liability on the balance sheet
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Understanding
93. If a credit memo appears on a bank reconciliation, this could be an indication that:
a.
there has been a decrease the company's bank account
b.
there has been a bank service charge
c.
there has been a deposit of a customer's NSF check
d.
there has been a note receivable for the company that was collected by the bank.
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Understanding
94. A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. This item would
be included on the bank reconciliation as a(n)
a.
addition to the balance per the company's records
b.
addition to the balance per the bank statement
c.
deduction from the balance per the bank statement
d.
deduction from the balance per the company's records
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
95. A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. What entry is
required in the company's accounts?
a.
debit Accounts Payable; credit Cash
b.
debit Cash; credit Accounts Receivable
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Receivable; credit Cash
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
96. The documentation with the bank statement shows a debit memo for bank service charges. Based on this, what
possible entry would be made in the company's accounts?
a.
debit Miscellaneous Administrative Expense; credit Cash
b.
debit Cash; credit Other Income
c.
debit Cash; credit Accounts Payable
d.
debit Accounts Payable; credit Cash
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Understanding
97. If receipts from cash sales of $7,500 were recorded incorrectly as $5,700 in the company’s books, then this item
would be included on the bank reconciliation as a(n)
a.
deduction from the balance per company's records
b.
addition to the balance per bank statement
c.
deduction from the balance per bank statement
d.
addition to the balance per company's records
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-02 - LO: 06-02
KEYWORDS:
Bloom's: Analyzing
98. Most annual reports now include a report of management to the stockholders. In this report, which group has the
primary responsibility for the preparation and integrity of the financial statements?
a.
Management
b.
The company’s CPAs
c.
The company’s internal audit staff
d.
The audit committee of the company’s board of directors
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
99. Which of the following is not a requirement of Sarbanes-Oxley?
a.
Annual report must include an internal control report
b.
External auditors can no longer provide human resource services
c.
External auditors can no longer provide brokerage services
d.
Must establish an internal control system that guarantees financial accuracy
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
100. Which of the following is not a requirement of a company’s external auditors under Sarbanes-Oxley?
a.
They must give an opinion that management’s assessment that the internal control system over financial
reporting is fairly stated.
b.
They must give an opinion that the company maintained an effective internal control system over financial
reporting.
c.
They must design and implement an effective information system design.
d.
They cannot perform any brokerage services for the company.
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
101. Which of the following represents the subset of board of directors that acts as a direct contact between stockholders
and the independent accounting firm?
a.
External Auditors
b.
Internal audit staff
c.
Audit Committee
d.
Stockholders’ representative
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
102. Sarbanes-Oxley requires that the audit committee be composed of
a.
At least 50% of key officers who are on the board of directors
b.
A majority of all of the members of the board of directors
c.
The outside members of the board of directors and the external auditor
d.
Entirely outside members of the board of directors
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
103. Which of the following represents a group composed of key officers of a corporation and outside members
responsible for the general oversight of the affairs of the company?
a.
Board of Directors
b.
Internal Audit Staff
c.
External Auditors
d.
Audit Committee
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
104. Which one of the following statements is true?
a.
The audit committee provides contact between the board of directors and the key officers of the company.
b.
The audit committee has become less involved in the financial accounting system as a result of the Foreign
Corrupt Practices Act.
c.
The audit committee is a board of directors subset that acts as a direct contact between the stockholders and
the independent accounting firm.
d.
The board of directors consists of the company's external auditors.
ANSWER:
c
DIFFICULTY:
Hard
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
105. What five-member body created by the Sarbanes-Oxley Act was given authority to set U.S. auditing standards?
a.
FASB
b.
SEC
c.
IAS
d.
PCAOB
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Remembering
106. Which one of the following is a sound internal control procedure for cash disbursements?
a.
Making copies of purchase orders for the receiving department so they know how many items to be expected
upon delivery
b.
Using presigned checks to facilitate payment within the cash discount period
c.
Comparing purchase requisitions, purchase orders, receiving reports, and invoices
d.
Requiring the signature of the purchasing department supervisor on checks
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
KEYWORDS:
Bloom's: Understanding
107. An internal control system consists of all the following policies and procedures except:
a.
Those necessary to ensure the safeguarding of an entity’s assets.
b.
Those necessary to ensure that cash on hand and on deposit in checking accounts is beyond the minimal
amount for ongoing operations.
c.
Those necessary to ensure the reliability of its accounting records.
d.
Those necessary to ensure the accomplishment of its overall objectives.
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
108. Which one of the following situations reflects a weak internal control system?
a.
All employees are well supervised.
b.
A single employee is responsible for comparing a receiving report to an invoice.
c.
All employees must take their vacations.
d.
A single employee is responsible for collecting and recording of cash.
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-03 - LO: 06-03
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
109. The group within an organization that is responsible for monitoring and evaluating the internal control system is
called:
a.
the audit committee.
b.
the internal audit staff.
c.
the board of directors.
d.
the accounting staff.
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Remembering
110. Which of the following statements does not describe the responsibilities of a company’s internal audit staff?
a.
Internal auditors ensure that the company’s financial statements have been presented fairly.
b.
Internal auditors focus on the efficiency with which the organization is run.
c.
Internal auditors help ensure that the company’s policies and procedures are followed.
d.
Internal auditors prepare the report of management to the company’s stockholders.
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
111. Which one of the following is considered one of the six most important categories of internal control procedures?
a.
Computerized accounting systems
b.
The board of directors
c.
Proper authorizations
d.
Verification by government agencies
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
112. Which of the following is not a generally recognized internal control procedure?
a.
Establishing of clear lines of authority to carry out specific tasks
b.
Physically counting inventory in a perpetual inventory system
c.
Reducing the cost of hiring seasonal employees
d.
Limiting access to computerized accounting records
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
113. Which one of the following is not a generally recognized internal control procedure?
a.
Internal review by the audit committee of the board of directors
b.
Independent verification of the work of one employee by another employee
c.
Independent review and appraisal by internal auditors
d.
Segregation of duties
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
114. Allowing only certain employees to order goods and services for the company is an example of what internal control
procedure?
a.
Segregation of duties
b.
Safeguarding of assets and records
c.
Independent verifications
d.
Proper authorizations
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
115. Which internal control procedure is followed when management authorizes the purchasing department to order goods
and services for the company?
a.
Segregation of duties
b.
Safeguarding of assets and records
c.
Independent verifications
d.
Proper authorizations
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
116. Which internal control procedure is followed when the work of one department acts as a check on the work of
another?
a.
Segregation of duties
b.
Safeguarding assets and records
c.
Independent verifications
d.
Proper authorizations
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
117. Which internal control procedure is followed when storage areas are secured with limited access?
a.
Segregation duties
b.
Safeguarding assets and records
c.
Independent verifications
d.
Proper authorizations
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
118. Which internal control procedure is followed when a physical count of inventory is performed in a perpetual
inventory system?
a.
Segregation of duties
b.
Safeguarding assets and records
c.
Independent verifications
d.
Proper authorizations
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
119. Which of the following is not considered a business (source) document?
a.
Time card
b.
Purchase order
c.
Sales invoice
d.
Schedule listing all the insurance policies in force
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
120. Having only one person authorized to both prepare and sign checks is a violation of what internal control procedure?
a.
Proper authorizations
b.
Independent review and appraisal
c.
Independent verifications
d.
Segregation of duties
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Applying
121. Which one of the following statements regarding internal control is true?
a.
Companies can design a system of internal control that is foolproof.
b.
A well-designed internal control system is a luxury that few companies can afford.
c.
It is easier to implement an effective internal control system in a small company because of the limited number
of employees.
d.
Large companies are able to devote a substantial amount of resources to internal control systems because these
companies have the assets to justify the cost.
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
122. Administrative controls
a.
are concerned with efficient operations and adherence to managerial policies.
b.
are concerned with the reliability of the financial statements.
c.
are the responsibility of the company's auditors.
d.
are concerned primarily with safeguarding assets.
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
123. Segregation and rotation of duties is most effective in
a.
increasing cost of goods sold.
b.
assisting management in overriding controls.
c.
preventing collusion.
d.
misappropriating company assets.
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Understanding
124. Which internal control procedure is violated when the cashier at the checkout stand also records the daily receipts in
the journal?
a.
Segregation of duties
b.
Independent review and appraisal
c.
Independent verifications
d.
Proper authorizations
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
125. Which one of the following documents is used in the control of cash receipts?
a.
Purchase requisitions
b.
Receiving reports
c.
Canceled checks from customers
d.
Bank deposit slips
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
126. Each of the following documents is used in the control of cash receipts except:
a.
Cash register tapes
b.
Check lists or prelists
c.
Canceled checks from customers
d.
Bank deposit slips
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
127. Each of the following documents is used in the control of cash disbursements except:
a.
Purchase requisitions
b.
Purchase orders
c.
Receiving reports
d.
Cash register tapes
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
128. Which one of the following documents is used in the control of cash disbursements?
a.
Income Statement
b.
Bank deposit slips
c.
Receiving reports
d.
Cash register tapes
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
129. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
Although the department supervisor can indicate a preferred supplier or vendor on purchase requisitions, the purchasing
department has the responsibility for making the final decision on a vendor.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
130. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
The receiving department compares the quantity received with the quantity printed on the receiving report when the
purchase order was prepared.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
131. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
Extensions and footings on purchase invoices are verified before the invoices are approved for payment
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
132. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
All documents attached to an invoice approval form are canceled before a check is signed.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
133. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
The clerk in the accounting department records both purchases and payments of invoices.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
134. The following set of items describes activities completed by a company in purchasing and paying for merchandise.
For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
Checks are signed by designated officers in the finance department.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
135. The following set of items describes activities completed by a company in collecting cash for merchandise sales. For
each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
A single employee in the mailroom opens the mail, counts the money received, and prepares a control list of the amount
received.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
136. The following set of items describes activities completed by a company in collecting cash for merchandise sales. For
each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
An employee in the accounting department records cash receipts from customers and prepares a bank deposit slip.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
137. The following set of items describes activities completed by a company in collecting cash for merchandise sales. For
each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
Cash register tapes are picked up daily by an employee from the accounting department.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
138. The following set of items describes activities completed by a company in collecting cash for merchandise sales. For
each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
An employee from the accounting department compares the control list and the cash register tapes with the bank deposit
slip.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
139. The following set of items describes activities completed by a company in collecting cash for merchandise sales. For
each activity, identify whether or not the activity adheres to or violates sound internal control procedures.
Monthly statements, indicating the current balance due, are mailed to customers.
a.
Adheres to sound internal control procedures
b.
Violates sound internal control procedures
c.
Neither strengthens nor violates internal control
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Applying
140. Which one of the following is not a procedure in the approval of a specific invoice for payment?
a.
The purchase requisition, purchase order, receiving report, and invoice are compared.
b.
The extensions and footings on the invoice are verified.
c.
An employee verifies that all of the approval activities have been completed before a check is prepared.
d.
The purchasing department prepares a voucher to request payment.
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
141. What is the form sent by the seller to the buyer as evidence of a sale?
a.
an invoice approval form
b.
an invoice
c.
a receiving report
d.
a purchase order
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
142. The department in an organization that is responsible for preparing the invoice approval form to document all of the
information about a particular purchase is:
a.
the human resources department.
b.
the purchasing department.
c.
the receiving department.
d.
the accounting department.
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
143. Which of the following is another term for the invoice approval form?
a.
a receiving report
b.
an invoice
c.
a voucher
d.
a remittance advice
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
144. A voucher is usually supported by
a.
a supplier's invoice
b.
a purchase order
c.
a receiving report
d.
all of the above
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
145. The notification accompanying a check that indicates the specific invoice being paid is called a
a.
remittance advice
b.
voucher
c.
debit memo
d.
credit memo
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-05 - LO: 06-05
KEYWORDS:
Bloom's: Understanding
Multiple Response
146. Select the action that matches the category of internal control procedures. (Select all that apply.)
Independent review and appraisal
a.
One department should check on another
b.
Internal audit staff ensure all is working as intended
c.
Accounting and cash collection is properly separated
d.
Blank checks are locked at all times when not in use
e.
Origination of initial entry into accounting system
f.
Specific authority is given by management for the performance of activities
ANSWER:
a, b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.06-04 - LO: 06-04
KEYWORDS:
Bloom's: Remembering

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