Question 1

Which of the following best describes the 'fraud triangle' in the context of financial accounting?

Accepted Answer

It is a model that explains the three elements necessary for fraud to occur: opportunity, pressure, and rationalization.

Question 2

Which of the following is NOT one of the five objectives of internal control?

Accepted Answer

Maximize shareholder wealth

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 of duties

Question 4

Which of the following is an example of a detective control?

Accepted Answer

Exception reporting and audits

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 when preparing a bank reconciliation?

Accepted Answer

Bank service charges

Question 7

Which of the following is considered a cash equivalent on the balance sheet?

Accepted Answer

A certificate of deposit with a maturity of two months

Question 8

A company’s cash account shows a balance of $$5,000. The bank statement shows a balance of 5$$,800. There is a deposit in transit of $$1,200 and outstanding checks of 900. $$What is the adjusted bank balance?

Accepted Answer

$$6,100 = 5$$,800 + $$1,200 - 900$

Question 9

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

Accepted Answer

They can be circumvented by collusion

Question 10

Which of the following best describes the role of unsupervised machine learning in expense reimbursement fraud detection?

Accepted Answer

It flags unusual receipts for further human investigation.

Question 11

A company’s bank reconciliation includes the following: bank collection of $$1,000, interest revenue of 50$$, and a service charge of $20. What is the total adjustment to the book balance?

Accepted Answer

$$1,030 = 1$$,000 + $$50 - 20$

Question 12

Which of the following is NOT a common type of expense reimbursement fraud as classified by the ACFE?

Accepted Answer

Unrecorded revenue

Question 13

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

Accepted Answer

Mandatory vacations and job rotation

Question 14

If a company’s accounting department discovers a bank error that deducted $200 from their account for another company’s check, how should this be handled in the bank reconciliation?

Accepted Answer

Add $200 to the bank balance

Question 15

Which of the following is a reason why cash requires specific internal controls?

Accepted Answer

Cash is easy to steal and conceal

Question 16

A company’s petty cash fund is maintained on an imprest system. At the end of the month, the fund contains $$50 in cash and 150 in $$petty cash vouchers. What was the original amount of the petty cash fund?

Accepted Answer

$$200 = 50$$ + $$150$$

Question 17

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

Accepted Answer

Financial leverage

Question 18

Which of the following is a benefit of using machine learning for fraud detection in expense reimbursements?

Accepted Answer

It can examine every transaction immediately upon submission.

Question 19

Which of the following would NOT be included in cash and cash equivalents on the balance sheet?

Accepted Answer

Inventory

Question 20

A company’s bank reconciliation shows an NSF check of $300. What is the correct journal entry to adjust the book balance?

Accepted Answer

Debit Accounts Receivable $$300; Credit Cash 300$$

Chapter 4: Internal Control and Cash – Study Notes

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