FINAL REVIEW (Ch. 7) – Flashcards

The Internal Control—Integrated Framework was issued by the Committee of Sponsoring Organizations and provides a framework that is the widely accepted standard by which companies: A) design, analyze, and evaluate internal controls. B) evaluate financial results. C) design financial statements. D) structure their organizations.

Which of the following is NOT a result or characteristic of the Sarbanes-Oxley Act of 2002: A) elimination of fraud and theft B) strong internal controls over the recording of transactions C) effective internal controls over the preparation of financial statements D) restoring public confidence and trust in the financial statements of companies

Which of the following is NOT true concerning the Internal Control—Integrated Framework: A) The framework is the widely accepted standard by which companies analyze and evaluate internal controls. B) It was issued by the FASB. C) The framework is the widely accepted standard by which companies design internal controls. D) It is often the basis of a discussion of internal controls.

The control environment is influenced by all of the following primary factors EXCEPT: A) the company's personnel policies B) management's philosophy and operating style C) the company's organizational structure D) changes in the personnel that make up the internal audit team

Which one of the following is NOT an element of internal control: A) control procedures B) risk assessment C) monitoring D) reorienting management philosophy away from controls

Which of the following statements reflects a weak internal control system: A) All employees must take their vacations. B) All employees are well supervised. C) A single employee is responsible for receiving and counting cash. D) A system of checks and balances is established.

The debit balance in Cash Short and Over at the end of an accounting period is reported as: A) an asset on the balance sheet. B) an expense on the income statement. C) income on the income statement. D) a liability on the balance sheet.

Which of the following is NOT an internal control activity for cash: A) Banking facilities should be used as much as possible. B) All cash payments should be made with cash. C) All cash receipts should be recorded promptly. D) Surprise audits of cash on hand should be made occasionally.

Which of the following is NOT an internal control activity for cash: A) The functions of cash record keeping and cash custody should be combined. B) The number of persons who have access to cash should be limited. C) All cash receipts should be recorded promptly. D) Surprise audits of cash on hand should be made occasionally.

A bank service charge appears on the bank statement as a: A) debit memorandum that increases the account balance. B) credit memorandum that increases the account balance. C) credit memorandum that decreases the account balance. D) debit memorandum that decreases the account balance.

Which one of the following would NOT cause a bank to debit a depositor's account: A) checks marked NSF B) bank service charge C) interest earned by the account D) wiring of the depositor's funds to other locations

Which of the following would appear as a credit memorandum on the bank statement: A) service charge B) NSF check C) EFT deposit D) bank correction of an error from recording a $300 check paid as $30

Grace Company gathered the following reconciling information in preparing its July bank reconciliation. *The adjusted cash balance per the books on July 31 is: Cash balance per books, 7/31 = $4,500 Deposits in transit = 150 Notes receivable and interest collected by bank = 850 Bank charge for check printing = 20 Outstanding checks = 2,000 NSF check = 170 A) $3,310 B) $5,160 C) $5,010 D) $3,460

A bank reconciliation has: A) a bank section and a company section. B) a bank section only. C) a company section only. D) None of these choices are correct.

Hector Company developed the following reconciling information in preparing its March bank reconciliation. - *Using the above information, determine the adjusted cash balance for March: Cash balance per books, 3/31 = $12,000 Note receivable collected by bank = 6,000 Outstanding checks = 9,000 Deposits in transit = 4,500 Bank service charge = 75 NSF check = 1,200 A) $15,500 B) $7,500 C) $16,725 D) $12,225

Palm Company gathered the following reconciling information in preparing its April bank reconciliation. *The adjusted cash balance per the books on April 30 is: Cash balance per books, 4/30 = $4,300 Deposits in transit = 150 Notes receivable and interest collected by bank = 850 Bank charge for check printing = 20 Outstanding checks = 2,000 NSF check = 170 A) $2,280. B) $3,110. C) $4,960. D) $2,450.

Which of the following is NOT a requirement or result of the Sarbanes-Oxley Act of 2002: A) helping to prevent fraud and theft. B) strong internal controls over the recording of transactions. C) eliminating auditor reporting on a company's internal controls. D) effective internal controls over the preparation of financial statements.

Which of the following is NOT a reason that Congress passed the Sarbanes-Oxley Act of 2002: A) to apply to private companies B) to answer the public outcry related to the financial scandals of the early 2000s C) to require companies to maintain strong and effective internal controls over the preparation of financial statements D) to require companies to maintain strong and effective internal controls over the recording of financial transactions

If the same person orders supplies, verifies receipt of the supplies, and pays the supplier, which of the following is a possible negative result: A) All of these choices are correct. B) Orders may be placed on the basis of friendship rather than on price, quality and quantity of supplies. C) Supplies may be stolen by employees. D) The quantity and quality of supplies received may not be verified, thus causing the company to pay for supplies not received or for poor-quality supplies.

Internal control does NOT consist of policies and procedures that: A) ensure that business information is accurate. B) protect assets from misuse. C) guarantee the company will make a profit. D) aid management in directing operations toward achieving business goals.

The credit balance in Cash Short and Over at the end of an accounting period is reported as: A) a liability on the balance sheet. B) an expense on the income statement. C) an asset on the balance sheet. D) income on the income statement.

An NSF check appears on the bank statement as a: A) debit memorandum that decreases the account balance. B) credit memorandum that increases the account balance. C) debit memorandum that increases the account balance. D) credit memorandum that decreases the account balance.

A bank correction of an error from recording a $50 check paid as $500 appears on the bank statement as a: A) debit memorandum that decreases the account balance. B) credit memorandum that increases the account balance. C) debit memorandum that increases the account balance. D) credit memorandum that decreases the account balance.

A check drawn by a depositor for $150 in payment of a liability was recorded in the journal as $510. This item would be included on the bank reconciliation as: A) a deduction from the balance per the depositor's records. B) an addition to the balance per the depositor's records. C) a deduction from the balance per the bank statement. D) an addition to the balance per the bank statement.