1. To have a strong internal control system, a business must have good administrative controls. Administrative controls include: A. B. C. D. the reconciliation of the bank statement. the accuracy of the recording procedures. assessing compliance with company policies. maintenance of accurate inventory records.
2. 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. 3. Hyperion Company has established internal control policies and procedures in order to achieve the following objectives: (1) Safeguard the company's assets (2) Assure that the accounting records contain reliable information (3) Evaluate management performance effectively (4) Assure that employees comply with company policies Which of these objectives are primarily achieved by accounting controls? A. B. C. D. Objectives 1 and 2 Objectives 2 and 3 Objectives 3 and 4 Objectives 1 and 4
4. Which of the following is not a generally recognized internal control procedure? A. B. C. D. Establishment of clear lines of authority. The minimization of labor cost. Requiring regular vacations for employees. Having employees covered by a fidelity bond.
5. Which of the following statements accurately describes a fidelity bond? A. B. C. D. Insurance that the company buys to protect itself from loss due to employee dishonesty. Proper procedures for processing accounting transactions. Procedures to provide reasonable assurance that the objectives of a company are accomplished. Guidelines that limit the actions and authority of different levels of management.
6. Which of the following is not one of the purposes of an internal control system? A. B. C. D. Safeguarding the company's assets Ensuring that the company is using the most effective marketing plan The assessment of the degree of compliance with company policies and public laws The evaluation of performance
7. Which of the following is not considered an accounting control? A. B. C. D. Performance evaluations of managers. Requiring employees to take vacations or rotate job duties. Bonding of employees. Use of prenumbered documents.
8. A business's administrative controls are concerned with A. B. C. D. Safeguarding a company's assets. Assessing the extent of compliance with laws and company policies. Ensuring the company has enough cash to operate effectively. Ensuring the reliability of the accounting records.
9. Which of the following is an internal control procedure used to safeguard a company's assets? A. B. C. D. Timely deposits of cash receipts into a checking account. Separation of duties. Reconciliation of the bank statement. All of these.
10. Which of the following is not a reason why a business needs strong internal controls over cash? A. B. C. D. A small volume of high-denomination currency represents a significant amount of value. Ownership of cash is difficult to prove. Cash has universal appeal. Money is the common unit of measurement in business.
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11. The following are strong control measures over cash receipts except for: A. B. C. D. A record of all cash collections should be prepared immediately upon receipt. Employees who receive cash should give customers a written receipt. There should be a significant amount of cash on hand in order to avoid writing checks. Cash receipts should be deposited in a bank as soon as possible.
12. The following...