Question 1

Which of the following best describes the 'Fraud Triangle' and its components?

Accepted Answer

It consists of three elements: Motive, Opportunity, and Rationalization, which together explain why individuals commit fraud.

Question 2

Which of the following is NOT a primary objective of an internal control system?

Accepted Answer

To promote operational efficiency above all other objectives.

Question 3

A company discovers that an employee has been both handling cash and recording cash transactions. Which internal control principle has been violated?

Accepted Answer

Separation (segregation) of duties

Question 4

Which of the following is an example of a detective (monitoring) control?

Accepted Answer

Reconciliation of the bank statement with the company’s cash records

Question 5

A company’s bank reconciliation shows a deposit in transit of $$2,000 and outstanding checks of 1$$,500. If the bank statement balance is $10,000, what is the adjusted bank balance?

Accepted Answer

$$10,500 \ (\10$$,000 + \$$2,000 - \1$$,500)$

Question 6

Which of the following items would require a journal entry on the company’s books when preparing a bank reconciliation?

Accepted Answer

Bank service charges

Question 7

Which of the following is considered a cash equivalent?

Accepted Answer

A U.S. Treasury bill with a maturity of two months

Question 8

A company’s petty cash fund started with $$500. At month-end, vouchers for 420 in $$expenses and $60 in cash remain. What is the amount needed to replenish the petty cash fund?

Accepted Answer

$$440 \ (\500$$ - \$$60)$$

Question 9

Which of the following best describes the purpose of a firewall in an accounting information system?

Accepted Answer

To limit unauthorized access to the company’s computer network

Question 10

Which of the following is a limitation of internal controls?

Accepted Answer

Collusion among employees can circumvent controls

Question 11

A company’s bank reconciliation includes the following: bank balance $$5,000, deposit in transit 1$$,200, outstanding checks $$800, and a bank error (bank deducted 100 $$for another company’s check). What is the adjusted bank balance?

Accepted Answer

$$5,500 \ (\5$$,000 + \$$1,200 - \800$$ + \$$100)$$

Question 12

Which of the following is an example of expense reimbursement fraud?

Accepted Answer

An employee submits the same hotel receipt for reimbursement twice

Question 13

Which of the following best explains why companies use unsupervised machine learning for fraud detection?

Accepted Answer

It can examine every transaction and flag unusual patterns for human review

Question 14

Which of the following is NOT a component of an internal control system?

Accepted Answer

Financial statement analysis

Question 15

A company’s bank reconciliation shows the following book side adjustments: bank collection $$1,000, interest revenue 50$$, service charge $$20, and NSF check 80. $$What is the total adjustment to the book balance?

Accepted Answer

$$950 \ (\1$$,000 + \$$50 - \20$$ - \$$80)$$

Question 16

Which of the following is a preventative internal control procedure?

Accepted Answer

Limiting access to assets based on job responsibilities

Question 17

Which of the following would NOT be classified as a cash equivalent on the balance sheet?

Accepted Answer

A 6-month certificate of deposit purchased 2 months before year-end

Question 18

Which of the following is a reason why fraud is considered unethical in business?

Accepted Answer

It violates the rights of many for the temporary benefit of a few

Question 19

A company’s accountant discovers that a check was recorded in the books as $$250, but the actual amount paid was 520. $$What adjustment should be made during the bank reconciliation?

Accepted Answer

Subtract $270 from the book balance

Question 20

Which of the following best describes the role of monitoring in an internal control system?

Accepted Answer

It involves ongoing or periodic assessment of the quality of internal control performance over time

Internal Control and Cash: Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards