Question 1

A corporation's own stock that is repurchased by the company on the open market is a marketable security.

Accepted Answer

Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. A corporation's own stock that is repurchased is known as treasury stock, not a marketable security.

Question 2

For both source of capital processes and investment processes, the important control is the specific authorization and oversight by top management.

Accepted Answer

This statement is true. Both source of capital processes and investment processes require specific authorization and oversight by top management in order to ensure that funds are being used appropriately and in the best interest of the company. This helps to mitigate risk and ensure that capital is being deployed in a strategic and effective manner.

Question 3

Special journals are journals that are established to record the transactions of specific customers and vendors.

Accepted Answer

Special journals are used to record specific types of transactions, such as sales, purchases, cash receipts, and cash payments, not transactions of specific customers and vendors.

Question 4

Reports disseminated to lower level managers are usually used to provide feedback and establish production schedules or sales goals.

Accepted Answer

The answer of Reports disseminated to lower level managers are...

Question 5

External users need detailed balance information on every existing account in the general ledger.

Accepted Answer

External users typically require summarized financial information rather than detailed account balances, which are more relevant for internal users like management.

Question 6

One of the reasons that management, not employees, initiates more unethical and fraudulent activities is that employees do not have access to much of the documentation needed to affect the event.

Accepted Answer

Management typically has access to more sensitive information and documentation than lower-level employees, which can allow them to initiate unethical or fraudulent activities more easily.

Question 7

Employees are more likely to hide or conceal fraudulent activity in the records of fixed assets and capital acquisition events than elsewhere.

Accepted Answer

The answer of Employees are more likely to hide or...

Question 8

An example of good internal control is having one person responsible for the value of the total of the sales in the sales journal and another person responsible for the balance of sales in the general ledger.

Accepted Answer

This is an example of a segregation of duties, which is a good internal control practice. By having different individuals responsible for different aspects of the sales process, the risk of errors or fraud is reduced.

Question 9

Because of their access to the accounting system, internal managers need less detailed reports than external users.

Accepted Answer

Internal managers require detailed reports to make informed decisions and manage operations effectively, whereas external users typically receive summarized financial information.

Question 10

General ledger employees should record journal vouchers, but they should not authorize journal vouchers, have custody of assets, or have recording responsibility for any special journals or subsidiary ledgers.

Accepted Answer

General ledger employees are responsible for recording journal vouchers, but they should not have authority over them or be responsible for other accounting functions such as custodianship of assets or maintaining special journals/subsidiary ledgers.

Question 11

Unethical and fraudulent behaviors are much more likely to be initiated by employees, not management.

Accepted Answer

Unethical and fraudulent behaviors can be initiated by both employees and management, and often management has more opportunity and power to commit such acts.

Question 12

To set a proper ethical tone, top managements should measure several factors of managerial performance without over-emphasizing profitability or cost cutting.

Accepted Answer

Setting a proper ethical tone requires measuring several factors of managerial performance, including but not limited to profitability and cost cutting. However, over-emphasizing these factors may lead to unethical behavior and decisions. Therefore, top managements should balance their focus on different aspects of performance to promote ethical behavior and decision-making.

Question 13

The only method of exercising corporate governance over administrative processes and financial reporting is through the company's budgeting process.

Accepted Answer

Corporate governance involves various processes and mechanisms, including but not limited to, the budgeting process. Other measures may include internal audits, external audits, board oversight, and regulatory compliance.

Question 14

A well-defined chart of accounts would contain an account titled "Rent."

Accepted Answer

The answer of A well-defined chart of accounts would contain...

Question 15

In the case of a manual accounting system, an approved journal voucher must be forwarded to the general ledger department before transactions can be recorded.

Accepted Answer

In a manual accounting system, journal vouchers must be approved and forwarded to the general ledger department before transactions can be recorded.

Question 16

Subsidiary ledgers maintain the detail information regarding routine transactions, with an account established for each entity.

Accepted Answer

Subsidiary ledgers are used to maintain the details of routine transactions, with each entity having their own account within the ledger.

Question 17

Business processes in an organization do not include events that are accounting transactions.

Accepted Answer

Business processes in an organization often include events that are accounting transactions, such as invoicing customers, paying bills, and recording revenue and expenses.

Question 18

Service firm internal reports are more likely to focus on sales and the status of projects.

Accepted Answer

Service firms typically focus on tracking sales and the progress of their ongoing projects in their internal reports to ensure the smooth operation of their services.

Question 19

Approvals for each journal voucher are specific authorizations.

Accepted Answer

The answer of Approvals for each journal voucher are specific...

Quiz 12: Administrative Processes and Controls