Chapter 8 Practice Materials.doc

Chapter 8Sarbanes Oxley, Internal Control, & Cash F 407Chapter 8 Sarbanes Oxley, Internal Control, & CashMULTIPLE CHOICE1.Which one of the following below is not an element of internal control?a.risk rmation and communicationd.behavior analysisANS:DDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry2.Which one of the following below is not a factor that influences a businesss control environment?a.managements philosophy and operating anizational ofs and security measurersd.personnel policiesANS:CDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry3.When a firm uses internal auditors, it is adhering to which one of the following internal control elements?a.risk assessmentb.Mofs and security measuresd.separating responsibilities for related operationsANS:BDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry4.The objectives of internal control are to a.control the internal organization of the accounting department personnel and vide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied withc.prevent fraud, and promote the social interest of the vide control over internal-use only reports and employee internal conductANS:BDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry5.Which one of the following below reflects a weak internal control system? a.all employees are well supervisedb.a single employee is responsible for comparing a receiving report to an invoicec.all employees must take their vacationsd.a single employee is responsible for collecting and recording of cashANS:DDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry6.Internal control does not consist of policies and procedures that tect assets from misuseb.aid management in directing operations toward achieving business goalsc.guarantee the company will not go bankruptd.ensure that business information is accurateANS:CDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry7.A firms internal control environment is not influenced by a.managements operating anizational structurec.personnel policiesd.monitoring policiesANS:DDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry8.An element of internal control is a.risk assessmentb.journalsc.subsidiary ledgersd.controlling accountsANS:ADIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry9.A necessary element of internal control is a.databaseb.systems designc.systems rmation and communicationANS:DDIF:EasyOBJ:08-02NAT:AACSB Analytic | AICPA BB-Industry10.In managements internal control report that is now required of all public companies, which of the following does not have a direct effect on a companys internal control ernal auditorsb.independent accountantsc.Board of Directors audit committeed.Board of trusteesANS:DDIF:ModerateOBJ:08-02NAT:AACSB Analytic | AICPA BB-Legal11.Which of the following should not be considered cash by an accountant?a.money ordersb.bank checking accountsc.postage ers checksANS:CDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement12.The cash account in the depositors ledger is a(n) a.asset with a debit balanceb.asset with a credit balancec.liability with a debit balanced.liability with a credit balanceANS:ADIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement13.The notification accompanying a check that indicates the specific invoice being paid is called a a.remittance adviceb.voucherc.debit memorandumd.credit memorandumANS:ADIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement14.The debit balance in Cash Short and Over at the end of an accounting period is reported as a.an expense on the income statementb.income on the income statementc.an asset on the balance sheetd.a liability on the balance sheetANS:ADIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement15.An example of a preventive control is a.the use of a bank accountb.separation of the Purchasing Department and Accounting Department personnelc.bonding employees who handle cashd.accepting payment in currency onlyANS:BDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement16.Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called a.accounting controlsb.cash controlsc.preventive controlsd.detective controlsANS:CDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement17.A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)a.invoiceb.voucherc.debit memorandumd.remittance adviceANS:BDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement18.EFT a.means Efficient Funds Transferb.can process certain cash transactions at less cost than by using the mailc.makes it easier to document purchase and sale transactionsd.means Effective Funds TransferANS:BDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement19.A voucher a.is received from customers to explain the purpose of a paymentb.is normally prepared in the Accounting Departmentc.system is used to control cash receiptsd.system is an internal control procedure to verify that the assets in the ledger are the ones the company ownsANS:BDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement20.A voucher is usually supported by a.a suppliers invoiceb.a purchase orderc.a receiving reportd.all of the aboveANS:DDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement21.Under the voucher system, every transaction is recorded at the time of a.requisitioningb.orderingc.incurringd.payingANS:CDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement22.The reconciliation of the cash register tape with the cash in the register is an example ofa. other controls.b. independent internal verification.c. establishment of responsibility.d. segregation of duties.ANS:BDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement23.Which of the following is not an internal control activity for cash?a. The number of persons who have access to cash should be limited.b. All cash receipts should be recorded promptly.c.The functions of record keeping and maintaining custody of cash should be combined.d. Surprise audits of cash on hand should be made occasionally.ANS:CDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement24.The term cash includesa.coins, currency (paper money), checksb.money orders, and money on deposit that is available for unrestricted withdrawal c.short-term receivablesd.a and be.all of the aboveANS:DDIF:EasyOBJ:08-03NAT:AACSB Analytic | AICPA FN-Measurement25.On the banks accounting records, customers accounts are normally shown as a.debit balancesb.expensesc.an assetd.a liabilityANS:DDIF:EasyOBJ:08-04NAT:AACSB Analytic | AICPA FN-Measurement26.Credit memorandums from the bank a.decrease a bank customers accountb.are used to show a bank service chargec.show that a company has deposited a customers NSF checkd.show the bank has collected a note receivable for the customerANS:DDIF:EasyOBJ:08-04NAT:AACSB Analytic | AICPA FN-Measurement27.A bank statementa. is a credit reference letter written by the depositors bank.b. lets a depositor know the financial position of the bank as of a certain date.c. is a bill from the bank for services rendered.d. shows the activity that increased or decreased the depositors account balance.ANS:DDIF:EasyOBJ:08-04NAT:AACSB Analytic | AICPA FN-Measurement28.Which one of the following would not cause a bank to debit a depositors account?a.Bank service chargeb.Collection of a note receivablec.Checks marked NSFd.Wiring of funds to other locationsANS:BDIF:EasyOBJ:08-04NAT:AACSB Analytic | AICPA FN-Measurement29.There are three parties to a check. The drawer isa.a written document signed by the depositorb.is the one who signs the check ordering payment by the bankc.the bank on which the check is drawnd.the party to whom payment is to be madee.none of the aboveANS:BDIF:ModerateOBJ:08-04NAT:AACSB Analytic | AICPA FN-Measurement30.A debit or credit memorandum describing entries in the depositors bank account may be enclosed with the bank statement. An example of a credit memorandum is a.deposited checks returned for insufficient fundsb.a promissory note left for collectionc.a service charged.notification that a customers check for $375 was recorded by the depositor as $735 on the deposit ticketANS:BDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement31.Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was a.deducted from the balance per depositors recordsb.deducted from the balance per bank statementc.added to the balance per bank statementd.added to the balance per depositors recordsANS:DDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement32.A person authorized to write checks drawn on a checking account at a bank must sign and have on file with the bank a a.signature cardb.deposit ticketc.checkbookd.bank cardANS:ADIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement33.A check drawn by a depositor for $180 in payment of a liability was recorded in the journal as $810. This item would be included on the bank reconciliation as a(n) a.addition to the balance per the depositors recordsb.addition to the balance per the bank statementc.deduction from the balance per the bank statementd.deduction from the balance per the depositors recordsANS:ADIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement34.A check drawn by a depositor for $180 in payment of a liability was recorded in the journal as $810. What entry is required in the depositors accounts?a.debit Accounts Payable; credit Cashb.debit Cash; credit Accounts Receivablec.debit Cash; credit Accounts Payabled.debit Accounts Receivable; credit CashANS:CDIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement35.A bank reconciliation should be prepared periodically because a.the depositors records and the banks records are in agreementb.the bank has not recorded all of its transactionsc.any differences between the depositors records and the banks records should be determined, and any errors made by either party should be discovered and correctedd.the bank must make sure that its records are correctANS:CDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement36.The bank reconciliation a.should be prepared by an employee who records cash transactionsb.is part of the internal control systemc.is for information purposes onlyd.is sent to the bank for verificationANS:BDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement37.Journal entries based on the bank reconciliation are required in the depositors accounts for a.outstanding checksb.deposits in transitc.bank errorsd.book errorsANS:DDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement38.Accompanying the bank statement was a debit memorandum for bank service charges. On the bank reconciliation, the item is a.a deduction from the balance per depositors recordsb.an addition to the balance per bank statementc.a deduction from the balance per bank statementd.an addition to the balance per depositors recordsANS:ADIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement39.Accompanying the bank statement was a debit memorandum for bank service charges. What entry is required in the depositors accounts?a.debit Miscellaneous Administrative Expense; credit Cashb.debit Cash; credit Other Incomec.debit Cash; credit Accounts Payabled.debit Accounts Payable; credit CashANS:ADIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement40.A check drawn by a depositor in payment of a voucher for $725 was recorded in the journal as $257. This item would be included in the bank reconciliation as a(n) a.deduction from the balance per the depositors recordsb.addition to the balance per the bank statementc.deduction from the balance per the bank statementd.addition to the balance per the depositors recordsANS:ADIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement41.A check drawn by a depositor in payment of a voucher for $725 was recorded in the journal as $257. What entry is required in the depositors accounts?a.debit Accounts Payable; credit Cashb.debit Cash; credit Accounts Receivablec.debit Cash; credit Accounts Payabled.debit Accounts Receivable; credit CashANS:ADIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement42.Receipts from cash sales of $9,500 were recorded incorrectly in the cash receipts journal as $5,900. This item would be included on the bank reconciliation as a(n) a.deduction from the balance per depositors recordsb.addition to the balance per bank statementc.deduction from the balance per bank statementd.addition to the balance per depositors recordsANS:DDIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement43.Receipts from cash sales of $9,500 were recorded incorrectly in the cash receipts journal as $5,900. What entry is required in the depositors accounts?a.debit Sales; credit Cashb.debit Cash; credit Accounts Receivablec.debit Cash; credit Salesd.debit Accounts Receivable; credit CashANS:CDIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement44.Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor. This item is a(n) a.deduction from the balance per depositors recordsb.addition to the balance per bank statementc.deduction from the balance per bank statementd.addition to the balance per depositors recordsANS:DDIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement45.Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer. What entry is required in the depositors accounts?a.debit Notes Receivable; credit Cashb.debit Cash; credit Miscellaneous Incomec.debit Cash; credit Notes Receivabled.debit Accounts Receivable; credit CashANS:CDIF:ModerateOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement46.The amount of deposits in transit is included on the bank statement as a(n) a.deduction from the balance per the depositors booksb.deduction from the balance per bank statementc.addition to the balance per bank statementd.addition to the balance per depositor booksANS:CDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement47.The amount of the outstanding checks is included on the bank reconciliation as a(n) a.deduction from the balance per depositors recordsb.addition to the balance per bank statementc.deduction from the balance per bank statementd.addition to the balance per depositors recordsANS:CDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement48.Which of the following items that appeared on the bank reconciliation did not require an adjusting entry?a.bank service chargesb.deposits in transitc.NSF checksd.A check for $520, recorded in the check register for $250.ANS:BDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement49.What entry is required in the depositors accounts to record outstanding checks?a.debit Accounts Receivable; credit Cashb.debit Cash; credit Accounts Receivablec.debit Cash; credit Accounts Payabled.noneANS:DDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement50.Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. This item would be included on the bank reconciliation as a(n) a.deduction from the balance per depositors recordsb.addition to the balance per bank statementc.deduction from the balance per bank statementd.addition to the balance per depositors recordsANS:ADIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement51.Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. What entry is required in the depositors accounts?a.debit Other Income; credit Cashb.debit Cash; credit Other Incomec.debit Cash; credit Accounts Receivabled.debit Accounts Receivable; credit CashANS:DDIF:EasyOBJ:08-05NAT:AACSB Analytic | AICPA FN-Measurement52.During the month, a company was informed that a check they had issu