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, all of which must be present for fraud to occur.

Question 2

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

Accepted Answer

Promote operational efficiency above all other objectives.

Question 3

A company’s accounting department compares the cash balance per the general ledger to the cash balance per the bank statement. What internal control procedure is this an example of?

Accepted Answer

Reconciliation

Question 4

Which of the following is an example of a preventative internal control?

Accepted Answer

Separation of duties

Question 5

A company’s bank statement shows a service charge of $25 that was not recorded in the company’s books. How should this be handled in the bank reconciliation?

Accepted Answer

Subtract $25 from the book balance.

Question 6

Which of the following is NOT considered a cash equivalent?

Accepted Answer

Shares of Apple stock

Question 7

A company’s controller discovers that two employees worked together to override internal controls and steal inventory. This is an example of:

Accepted Answer

Collusion

Question 8

Which of the following adjustments would be made to the bank side of a bank reconciliation?

Accepted Answer

Add deposits in transit

Question 9

A company’s books show a cash balance of $$5,000. The bank statement shows a balance of 5$$,500. There are $$800 in outstanding checks and a 300 $$deposit in transit. What is the adjusted bank balance?

Accepted Answer

$5,000

Question 10

Which of the following is a limitation of internal controls?

Accepted Answer

Human error and management override

Question 11

Which of the following best describes the purpose of a petty cash fund?

Accepted Answer

To pay for minor expenses without writing checks

Question 12

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

Accepted Answer

Audit

Question 13

A company’s accounting system uses check-sum digits for account numbers to detect errors. This is an example of:

Accepted Answer

Encryption

Question 14

Which of the following is a reason why companies use electronic funds transfer (EFT) for payments?

Accepted Answer

It provides a record of payment and is supported by evidence.

Question 15

Which of the following is a category of expense reimbursement fraud according to the ACFE?

Accepted Answer

Fictitious expenses

Question 16

Which of the following best describes unsupervised machine learning in the context of fraud detection?

Accepted Answer

It identifies unusual transactions without prior labeling and flags them for human investigation.

Question 17

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

Accepted Answer

$$10,000 + 1,000 - 500 = 10$$,500

Question 18

Which of the following is a real-world example of a control procedure that limits access to assets?

Accepted Answer

Requiring passwords and encryption for access to accounting systems

Question 19

Which of the following would require a journal entry after preparing a bank reconciliation?

Accepted Answer

Bank service charges not yet recorded in the books

Question 20

A company’s internal control system includes mandatory vacations and job rotation for employees handling cash. What is the primary purpose of this control?

Accepted Answer

To detect and prevent fraud by ensuring no one person controls a process for too long

Chapter 4: Internal Control and Cash – Financial Accounting Study Notes

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