Q: A company’s days’ sales uncollected is calculated as follows. If ending accounts receivable is $$18,000 and net sales are 120$$,000, what is the days’ sales uncollected?

$$\frac{18,000}{120,000} \times 365 = 54.75 $$ days

Question 1

Which of the following is NOT one of the four core objectives of an internal control system?

Accepted Answer

To maximize company profits

Question 2

According to COSO, which component of internal control is primarily concerned with the company’s ethical values and management’s commitment to integrity?

Accepted Answer

Control Environment

Question 3

A company’s internal control system separates recordkeeping from custody of assets. What is the main purpose of this principle?

Accepted Answer

To make fraud more difficult by requiring collusion

Question 4

Which scenario best illustrates the 'pressure' element of the fraud triangle?

Accepted Answer

An employee faces large medical bills and cannot pay them with their salary

Question 5

A company writes a check for $$1,250 but accidentally records it as 1$$,520 in its books. How should this error be corrected during a bank reconciliation?

Accepted Answer

Add $270 to the book balance

Question 6

Which of the following items is added to the bank balance during a bank reconciliation?

Accepted Answer

Deposits in transit

Question 7

A company’s bank statement shows a service charge of $40 that was not previously recorded in the company’s books. What journal entry should the company make?

Accepted Answer

Debit Bank Fees Expense $$40; Credit Cash 40$$

Question 8

Which limitation of internal control is best illustrated by two employees working together to steal inventory?

Accepted Answer

Collusion

Question 9

A company’s days’ sales uncollected is calculated as follows. If ending accounts receivable is $$18,000 and net sales are 120$$,000, what is the days’ sales uncollected?

Accepted Answer

$$\frac{18,000}{120,000} 	imes 365 = 54.75 $$ days

Question 10

Which of the following is considered a cash equivalent?

Accepted Answer

A Treasury bill maturing in 60 days

Question 11

Which principle of internal control is best demonstrated by requiring employees to use individual passwords to access accounting systems?

Accepted Answer

Establish responsibilities

Question 12

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

Accepted Answer

$$10,000 + 2,000 - 1,500 = 10,500 $$

Question 13

Which document is used by a purchasing department to formally request goods from a vendor?

Accepted Answer

Purchase order

Question 14

Which technological control would best help prevent unauthorized access to sensitive accounting records?

Accepted Answer

Two-factor authentication (2FA)

Question 15

A company uses a Zero Balance Account (ZBA) for payroll. What is the main advantage of this arrangement?

Accepted Answer

It provides tight cash control and helps prevent fraud

Question 16

Which of the following would require a journal entry when adjusting the company’s books during a bank reconciliation?

Accepted Answer

Bank fees deducted by the bank

Question 17

Which principle of internal control is best illustrated by having independent auditors review company records?

Accepted Answer

Perform regular and independent reviews

Question 18

A company’s internal control system is limited by the cost-benefit constraint. Which of the following best describes this limitation?

Accepted Answer

Controls should not cost more than the expected benefit

Question 19

Which of the following is a key element of banking services that helps verify the identity of employees authorized to sign checks?

Accepted Answer

Signature card

Question 20

A company’s annual net sales are $$365,000 and its ending accounts receivable is 36$$,500. What is its days’ sales uncollected?

Accepted Answer

$$\frac{36,500}{365,000} 	imes 365 = 36.5 $$ days

Chapter 8: Cash, Fraud, and Internal Control – Study Guide

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