1. 8.1 Which of the following would a fraudster perceive as a pressure?

A. lack of management oversight

B. everyone does it

C. living beyond one's means

D. lack of an internal audit function

2. 8.2 Internal control is said to be the backbone of all businesses. Which of the following is the best description of internal controls?

A. Internal controls ensure that the financial statements published are correct.

B. The only role of internal controls is to protect customer data.

C. Internal controls and company policies are important to protect and safeguard assets and to protect all company data and are designed to protect the company from fraud.

D. Internal controls are designed to keep employees from committing fraud against the company.

3. 8.3 What is the best way for owners of small businesses to maintain proper internal controls?

A. The owner must have enough knowledge of all aspects of the company and have controls in place to track all assets.

B. Small businesses do not need to worry about internal controls.

C. Small businesses should make one of their employees in charge of all aspects of the company, giving the owner the ability to run the company and generate sales.

D. Only managers need to be concerned about internal controls.

4. 8.3 Which of the following is not considered to be part of the internal control structure of a company?

A. Ensure that assets are kept secure.

B. Monitor operations of the organization to ensure maximum efficiency.

C. Publish accurate financial statements on a regular basis.

D. Ensure assets are properly used. Chapter 8 Fraud, Internal Controls, and Cash 561

5. 8.3 There are several elements to internal controls. Which of the following would not address the issue of having cash transactions reported in the accounting records?

A. One employee would have access to the cash register.

B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a prenumbered form.

C. Ask customers to report to a manager if they do not receive a sales receipt or invoice.

D. The person behind the cash register should also be responsible for making price adjustments.

6. 8.3 A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure?

A. No changes would be made since the person paying the bills is different from the person ordering the inventory.

B. The person in accounts payable should generate the purchase order.

C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received.

D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.

7. 8.3 There are three employees in the accounting department: payroll clerk, accounts payable clerk, and accounts receivable clerk. Which one of these employees should not make the daily deposit?

A. payroll clerk

B. account payable clerk

C. accounts receivable clerk

D. none of them

8. 8.3 Which one of the following documents is not needed to process a payment to a vendor?

A. vendor invoice

B. packing slip

C. check request

D. purchase order

9. 8.3 What is the advantage of using technology in the internal control system?

A. Passwords can be used to allow access by employees.

B. Any cash received does not need to be reconciled because the computer tracks all transactions.

C. Transactions are easily changed.

D. Employees cannot steal because all cash transactions are recorded by the computer/cash register.

10. 8.3 Which of the following assets require the strongest of internal controls?

A. inventory

B. credit cards

C. computer equipment

D. cash

EB9.

Using the following information, "prepare a" bank reconciliation.

Bank balance: $7,651

Book balance: $10,595

Deposits in transit: $2,588

Outstanding checks: $489

Interest income: $121

NSF check: $966

EB11. Using the following information, "prepare a" bank reconciliation.

Bank balance: $12,565.

Book balance: $13,744.

Deposits in transit: $2,509.

Outstanding checks: $1,777.

Bank charges: $125.

Bank incorrectly charged the account for $412. The bank will correct the error next month.

Check number 1879 correctly cleared the bank in the amount of $562 but posted in the accounting records as $652.

This check was expensed to Utilities Expense.