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Exam 4: Internal Controls, Accounting for Cash, and Ethics

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Question 91

Multiple Choice

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Which of the following statements concerning internal controls is true?

A) Internal administrative controls are designed to limit the amount of funds spent on investments.
B) The control procedure, separation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company.
C) Internal accounting controls are limited to the policies and procedures used to protect the company from embezzlement.
D) A strong internal control system provides reasonable assurance that the objectives of a company will be accomplished.

E) B) and D)
F) All of the above

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Question 92

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Indicate whether each of the following statements about cash payments is true or false. -Reviewing supporting documents before signing a check can prevent employee theft and also reveal errors that employees may have made

A) True
B) False

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Question 93

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Indicate whether each of the following statements regarding internal controls is true or false. -All spoiled and voided checks should be defaced and retained

At June 30, 2014, the bank reconciliation of Swale Company reveals deposits in transit of $2,000.

An effective system of internal control is designed to detect the following except for:

Krieger Company's bank statement included an NSF check written by one of its customers. What effect will the entry to recognize the NSF check have on the company's financial statements?

Wren Company accepted a check from Jay Company as payment for services rendered. Wren's bank statement revealed that the Jay check was an NSF check. What effect will the entry to record the NSF check have on the accounting equation of Wren Company?

Indicate whether each of the following statements about a bank statement is true or false. -The bank statement is prepared from the bank customer's point of view

At June 30, 2014, the bank reconciliation of Stein Company reveals outstanding checks of $820.

A financial statement audit is

Indicate whether each of the following statements about a bank statement is true or false. -A qualified opinion means that the financial statements are in compliance with GAAP, but the auditors have reservations about something in the financial statements

Indicate whether each of the following statements about separation of duties is true or false. -When a business achieves a clear separation of duties, the work of one employee acts as a check on the work of other employees

The most negative opinion that an auditor can express is the

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs do not prohibit auditors from testifying in a court of law

Indicate whether each of the following statements about cash payments is true or false. -A spoiled check should be marked void and then discarded or shredded

Link's entry to record the NSF check will

When a customer's NSF check is returned to a business, the business should record an uncollectible account loss.

Indicate whether each of the following statements about separation of duties is true or false. -Having a clear separation of duties will reduce employees' temptation to commit theft or fraud

Indicate whether each of the following statements is true or false. -Outstanding checks do not appear on the bank statement

Which of the following is not a feature of an internal control system?