Question 1

The controller at Horizon,Inc.needs new computers for the accounting department.However,there are no guidelines specifying whether the controller can approve purchases of office equipment. In the above situation,which internal control procedure needs strengthening?

Accepted Answer

The answer of The controller at Horizon,Inc.needs new computers for...

Question 2

Campaign Services hired a new accounting manager.He signed a contract for a new accounting information system,but his position did not specify whether he was authorized to do so or not. In the above situation,which internal control procedure needs strengthening?

Accepted Answer

The internal control procedure that needs strengthening is the assignment of responsibilities. The accounting manager's position did not specify whether he was authorized to sign a contract for a new accounting information system or not. Therefore, there was no clear assignment of responsibilities regarding this matter. To avoid such situations in the future, the organization should clearly define the roles and responsibilities of each employee, including the authority to make significant purchases or sign contracts.

Question 3

Burglar alarms,fire alarms,and security cameras improve internal control.

Accepted Answer

Burglar alarms, fire alarms, and security cameras are all examples of physical equipment and technology that help to prevent and detect unauthorized access, theft, and other security breaches. By improving internal control, these tools can help businesses and organizations protect their assets, data, and employees from harm or loss.

Question 4

A pharmaceutical company testing drugs to determine possible side effects is a part of ________.

Accepted Answer

The process of testing drugs to determine their possible side effects falls under the category of risk assessment, as it involves assessing the potential risks associated with the use of the drug. The other options, monitoring controls, information systems, and control procedures, do not specifically pertain to the process of drug testing for side effects.

Question 5

Cadmia Services hired a new clerk to keep custody of and maintain all the equipment in the equipment yard.The clerk has not yet been adequately trained on the maintenance needs of the equipment. In the above situation,which internal control procedure needs strengthening?

Accepted Answer

The internal control procedure that needs strengthening is the selection of competent, reliable, and ethical personnel. While the clerk was hired to maintain the equipment, they were not adequately trained which indicates that they may not be competent for the job. Adequate training should have been provided before entrusting the clerk with the responsibility. This can help to prevent potential equipment damage or loss.

Question 6

Which of the following is true of the internal control component-information system?

Accepted Answer

The information system component of internal control ensures that only authorized users have access to various parts of the system, which helps to prevent fraud and unauthorized transactions. Options A, B, and D describe other components of internal control.

Question 7

At Radiant,Inc. ,the sales department is also responsible for recording cash transactions as it does not have a separate accounting department. In the above situation,which internal control procedure needs strengthening?

Accepted Answer

The internal control procedure that needs strengthening is the separation of duties. It is not appropriate to have the sales department responsible for recording cash transactions as this can lead to errors or potential fraud. Separating the duties of handling cash and recording transactions can reduce the risk of these issues.

Question 8

The use of computer firewalls is an essential element of good internal controls for e-commerce.

Accepted Answer

Computer firewalls are used to prevent unauthorized access to a company's network and are considered an important internal control for e-commerce security. They help to protect sensitive customer information and prevent cyberattacks.

Question 9

At Cadmia Services,the cashier collects checks and cash from customers,and the junior accountant records the transactions in the journal.The controller approves the journal entries and bank reconciliations.The treasurer signs checks and approves contracts. Which internal control procedure is exemplified in the above situation?

Accepted Answer

The situation exemplifies separation of duties, where different tasks are assigned to different individuals to reduce the risk of errors or fraud. The cashier collects money, the junior accountant records transactions, the controller approves entries, and the treasurer signs checks and approves contracts. This ensures that one person does not have too much control over a single process, minimizing the likelihood of errors or fraud.

Question 10

Which of the following is an attribute of the internal control procedure-assignment of responsibilities?

Accepted Answer

Assignment of responsibilities is an attribute of internal control procedures, and it means that each position within a company has clearly defined responsibilities. This helps ensure that tasks are properly completed and that there is no confusion or overlap of duties, which can lead to errors or fraud. The other options do not directly relate to assignment of responsibilities within internal control procedures.

Question 11

Which of the following illustrates the internal control procedure-separation of duties?

Accepted Answer

Separation of duties requires that different people or groups of people should be responsible for different stages or aspects of a process. In this case, cashiers are not allowed to have access to accounting records, which ensures that responsibilities are divided and there is a lower risk of fraud or errors in cash handling and accounting.

Question 12

Which of the following describes the risk assessment component of internal control?

Accepted Answer

The risk assessment component of internal control involves identifying risks faced by the company and taking necessary measures to minimize those risks. This helps in ensuring the effectiveness and efficiency of the internal control system. Option A describes the role of internal and external auditors, option B refers to the general atmosphere of ethical behavior established by management, and option D relates to the purpose of internal control.

Question 13

Separating the custody of assets from accounting implies that the accountants must not handle cash and the cashier must not have access to the accounting records.

Accepted Answer

Separating custody of assets from accounting is one of the fundamental principles of internal controls, and it requires that the individuals responsible for handling cash and the accounting records should be different. The accountant should not have access to cash and should not handle cash, while the cashier should not have access to accounting records. This separation helps to prevent fraud and errors.

Question 14

Which of the following is included in the internal control procedure-documents?

Accepted Answer

The requirement to pre-number invoices and orders helps ensure that all transactions are accounted for and can be traced. The other choices suggest potential control measures but are not specific to documentation procedures.

Question 15

Which of the following is an attribute of the internal control procedure-competent,reliable,and ethical personnel?

Accepted Answer

Competent, reliable, and ethical personnel are important attributes of internal control procedures. This includes the need to train and supervise employees to ensure they understand and follow the established controls. Providing cross training to sales personnel and monitoring controls by external auditors can also be important, but they are not directly related to the attribute of competent, reliable, and ethical personnel. Purchase of burglar alarms may be a security measure, but it is not directly related to internal control procedures.

Question 16

Which of the following is an issue that must be addressed in the internal controls for e-commerce?

Accepted Answer

Phishing expeditions are a common tactic used by hackers to trick employees into giving up sensitive information or access to secure systems. Effective internal controls must be in place to prevent these attacks and train employees on how to identify and respond to them. While burglar alarms and outside auditors may be important for physical security and financial reporting, respectively, they are not specific to e-commerce. "Tone at the top" refers to the leadership culture within a company and its emphasis on ethical behavior, which is important for any business but not specific to e-commerce.

Question 17

Which of the following is an attribute of the internal control component-monitoring of controls?

Accepted Answer

Monitoring of controls involves both internal and external audits to ensure that the controls are effective in safeguarding assets and ensuring the accuracy of accounting records. This is distinct from the "tone at the top," which relates to the ethical climate set by management (B), the broader goal of achieving business objectives (C), and the identification and assessment of risks, which is part of the risk assessment component of internal control (D).

Question 18

Vaughn Services hires a new accountant to maintain its petty cash fund.Although the employee possesses an accounting degree,he/she had been previously convicted of embezzlement. Which internal control procedure needs to be addressed in the above situation?

Accepted Answer

The situation highlights the importance of hiring competent, reliable, and ethical personnel, which is an essential internal control procedure. Hiring an employee with a previous conviction of embezzlement may jeopardize the integrity of the company's financial operations, making it necessary to revisit the screening and selection process to ensure accountable personnel are hired. While other control procedures such as separation of duties and documents are important, they are not the main issue in this scenario.

Question 19

A(n)________ is a device that enables members of a local network to access the network while keeping nonmembers out of the network.

Accepted Answer

A firewall is a network security system that monitors and controls incoming and outgoing network traffic based on predetermined security rules. It is designed to prevent unauthorized access to or from a private network. A burglar alarm, fireproof vault, and electronic sensor are not relevant to network security.

Question 20

Which of the following describes a firewall?

Accepted Answer

A firewall is a technique for protecting data by controlling incoming and outgoing network traffic. It acts as a barrier between a trusted internal network and untrusted external networks, such as the internet. Option A describes a malware, Option B describes collusion, and option D describes fraud.

Quiz 7: Internal Control and Cash