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

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Question 41

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Indicate whether each of the following statements regarding internal controls is true or false. _____ a) Internal controls are used to provide reasonable assurance that the objectives of an enterprise will be accomplished. _____ b) Internal controls can be divided into accounting controls and administrative controls. _____ c) The mechanics of internal control systems do not vary from company to company. _____ d) Accounting controls are concerned with the evaluation of performance and the assessment of the degree of compliance with company policies and public laws. _____ e) Administrative controls are composed of policies and procedures that are designed to safeguard the assets and to assure that accounting records contain reliable information.

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a) This is true. Internal controls provi...

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Question 42

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Which of the following is not a principle of the AICPA Code of Professional Conduct?

A) Due Care
B) Objectivity and Independence
C) Integrity
D) Conservatism

E) A) and B)
F) B) and C)

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Question 43

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Owen Company's unadjusted book balance at June 30 is $9,700. The company's bank statement reveals bank service charges of $45. Two credit memos are included in the bank statement: one for $900, which represents a collection that the bank made for Owen, and one for $50, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:

Duke Company's unadjusted bank balance at March 31 is $2,300. The bank reconciliation revealed outstanding checks amounting to $500 and deposits in transit of $400. Based on this information, Duke's true cash balance is:

In a bank reconciliation, a customer's NSF check included with the bank statement is:

A bank statement debit memo describes a transaction that increases a customer's account balance.

Internal controls that assess degree of compliance with company policies are classified as administrative controls.

Which of the following is not one of the purposes of an internal control system?

Which of the following is not a generally recognized internal control procedure?

For a business, Cash generally includes currency, customers' checks, and some savings accounts.

Which of the following is not a typical form associated with a bank checking account?

After the check is signed, the third employee is the one who records the check in the company's records and examines the appropriate supporting documents.

While performing the monthly bank reconciliation, the bookkeeper for Avon Company made the adjusting entry for a bank service charge of $20. Which of the following correctly shows the effect of the entry on the financial statements?

In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. In preparing the bank reconciliation, this deposit in transit should be:

In preparing the April bank reconciliation for Oscar Company, it was discovered that on April 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. The correction the error of this error would increase:

The governance of a corporation includes the roles and responsibilities of the board of directors, managers, shareholders, and auditor.

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

The bank statement for Tetra Company contained the following items: a bank service charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had outstanding checks of $100 and a deposit in transit of $300. The entry to record the customer's NSF check will:

Indicate whether each of the following statements regarding internal controls is true or false. _____ a) Cash receipts should be deposited in a bank when they reach a predetermined level of materiality. _____ b) To improve operating efficiency, a company should make most of its disbursements in currency instead of checks. _____ c) Supporting documents are required when checks are presented to the check signer. _____ d) Supporting documents should not be marked "paid" until the check clears the bank. _____ e) All spoiled and voided checks should be shredded.