1. Which of the following pairs of duties combines the functions of custody and authorization in a manner that would allow an employee to conceal the theft of a customers payment?

a) Writing checks plus reconciling the bank statement

b)Handling cash receipts plus issuing credit memos

c) Handling cash receipts plus maintaining accounts receivable

2. The CEO is concerned about the possibility of employees stealing inventory. In the formal language used for risk analysis, theft of inventory is referred to as a(n):

a)exposure

b) risk

c) expected loss

d) threat

3. Which of the following procedures, by itself, is most effective at preventing employees from stealing cash?

a) Restrictively endorsing all checks from customers upon receipt

b) Using lockboxes for customer remittances

c)Having someone who has no access to cash reconcile the bank accounts

d) Sending monthly statements to customers

4. Which of the following combinations of duties can the same employee perform without violating the principle of segregation of duties?

a) Shipping inventory and billing customers

b) Issuing credit memos and maintaining accounts receivable

c) Taking customer orders and checking inventory availability

5. Which of the following types of fraud requires access to the accounts receivable master file?

a) Theft of inventory

b) Embezzlement

c)Lapping

d) Kiting

6. Which threat is most likely to result in the largest losses in a short period of time?

a) Duplicate payments to suppliers

b) Theft of inventory

c) Alteration of checks or EFT payments