Q: Which formula would you use to reconcile a petty cash fund?

$\text{Petty Cash Fund Balance} = \text{Cash on Hand} + \text{Petty Cash Vouchers}$

Question 1

Which of the following best describes the primary objective of internal control in a company?

Accepted Answer

To safeguard assets, ensure reliable accounting records, and promote operational efficiency

Question 2

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

Accepted Answer

Profit Maximization

Question 3

A company discovers that an employee has been writing checks to themselves and recording them as payments to suppliers. Which type of fraud does this represent?

Accepted Answer

Misappropriation of assets

Question 4

Which of the following is a limitation of internal control systems?

Accepted Answer

They can be circumvented by collusion or management override

Question 5

Which internal control procedure is violated if the same employee is responsible for both handling cash and recording cash transactions?

Accepted Answer

Separation of Duties

Question 6

A company uses point-of-sale terminals to record sales and inventory reductions. Which internal control objective is primarily being addressed?

Accepted Answer

Safeguard assets

Question 7

Which of the following is an example of a control procedure designed to protect cash receipts?

Accepted Answer

Depositing all cash receipts daily in the bank

Question 8

Which historical accounting scandal involved the overstatement of assets by approximately $11 billion?

Accepted Answer

WorldCom

Question 9

A company’s management overrides internal controls to approve their own journal entries. Which part of the fraud triangle does this most directly relate to?

Accepted Answer

Opportunity

Question 10

Which of the following is a recommended control for e-commerce transactions?

Accepted Answer

Using encryption and firewalls

Question 11

If a company’s petty cash fund is $500 and the vouchers plus remaining cash total $450, what is the amount of the shortage?

Accepted Answer

$50

Question 12

Which of the following best describes the purpose of a fidelity bond?

Accepted Answer

To insure the company against losses caused by employee theft

Question 13

Which of the following is an example of a control procedure for cash payments?

Accepted Answer

Requiring checks to be signed by authorized officials only

Question 14

A company’s internal audit discovers that two employees have been working together to bypass controls and steal inventory. This is an example of:

Accepted Answer

Collusion

Question 15

Which of the following is a benefit of using electronic sensors and bar codes in inventory management?

Accepted Answer

Improved accuracy and speed of inventory tracking

Question 16

Which of the following actions would best help Janet Black determine if Danielle Vale is telling the truth about increased supplier costs?

Accepted Answer

Examining purchase invoices and comparing them to receiving reports

Question 17

Which formula would you use to reconcile a petty cash fund?

Accepted Answer

$	ext{Petty Cash Fund Balance} = 	ext{Cash on Hand} + 	ext{Petty Cash Vouchers}$

Question 18

Which of the following is NOT a common type of fraud described in the study materials?

Accepted Answer

Accidental errors in financial statements

Question 19

Which internal control procedure involves comparing actual results to budgets and investigating significant differences?

Accepted Answer

Comparison and Compliance Monitoring

Question 20

Which of the following best explains why companies should not rely solely on internal controls to prevent fraud?

Accepted Answer

Internal controls can be circumvented by collusion, management override, or human error

Internal Control and Cash: Study Notes for Financial Accounting

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