Which of the following statements is true in terms of an internal control system?

A good internal control system will help a company achieve reliable financial reporting, effective and efficient operations, and compliance with laws and regulations.

The extent of internal control activities adopted by a company must not be evaluated in terms of cost-benefit.

An internal control system cannot be considered effective until the possibility of human error has been completely eliminated.

Only large companies need to be concerned with a system of internal control.

Testbank, Question 38

Which of the following is not a limitation of internal control?

cost of establishing control procedures

use of a bank account

the size of the company

the human element

An employee who makes a sale, ships the goods, and bills the customer violates which control activity?

assignment of responsibility

review and reconciliation

documentation

segregation of duties

Testbank, Question 41

Physical controls are not designed to safeguard assets from

unauthorized use.

robbery.

natural disasters.

employee theft.

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

collusion.

assignment of responsibilities.

a division of duties.

fraud prevention.

The use of electronic funds transfers

does not require segregation of duties.

eliminates opportunities for fraud.

normally results in better internal controls.

does not require proper authorization.

Which of the following is not a good control activity over cash?

There should be limited access to cash.

Payments to creditors should be made in cash.

The amount of cash on hand should be kept at a minimum.

Cash should be deposited daily.

Which of the following is not a suggested procedure to establish a good control activity over cash disbursements?

Pre-signed blank cheques.

Different individuals approve and make payments.

Blank cheques are stored with limited access.

The bank statement is reconciled monthly.