Select the correct option from the following:

1. Internal auditors

a. are employees of the IRS who evaluate the internal controls of companies filing tax returns.

b. are hired by CPA firms to audit business firms.

c. evaluate the system of internal controls for the companies that employ them.

d. cannot evaluate the system of internal controls of the company that employs them because they are not independent.

2. When two or more people get together for the purpose of circumventing prescribed controls, it is called

a. a fraud committee.

b. collusion

c. a division of duties

d. bonding of employees.

3. The receivable that is usually evidenced by a formal instrument of credit is a(n)

a. Trade Receivable

b. note receivable

c. account receivable

d. income tax receivable

4. Which of the following would require a compound journal entry?

a. To record merchandise returned that was previously purchased on account.

b. To record sales on account

c. To record purchases of inventory when a discount is offered for prompt payment.

d. To record collection of accounts receivable when a cash discount is taken.