Question 1

Cash registers, check protectors, time clocks and personal identification scanners are examples of devices that can improve internal control.

Accepted Answer

These devices help track and monitor transactions, prevent errors and fraud, and improve overall accountability and efficiency within a business, all of which are key components of internal control.

Question 2

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

Accepted Answer

Separation of duties is a commonly used internal control mechanism in organizations to prevent fraud and errors. It involves dividing responsibilities between different people or departments to ensure that no one person has complete control over a transaction or process from start to finish. This helps to reduce the risk of mistakes or intentional wrongdoing, and increases the effectiveness of internal controls.

Question 3

All internal control policies and procedures have limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

Accepted Answer

All internal control policies and procedures have limitations that can arise from human error or fraud, or from the cost-benefit principle. No internal control system is perfect and can completely eliminate all risks or errors.

Question 4

One effective cash management principle is to invest excess cash beyond what is needed for regular business in order to earn a return on the cash.

Accepted Answer

Investing excess cash can help a business earn a return on their cash, improving their overall financial performance.

Question 5

The use of internal controls provides a guarantee against a company's risk of loss.

Accepted Answer

Internal controls help mitigate risks but do not provide a guarantee against all potential losses.

Question 6

Maintaining adequate records is an important internal control principle.

Accepted Answer

Maintaining adequate records is a crucial internal control principle as it enables an organization to track its financial transactions and operations accurately. The records provide evidence of the company's compliance with legal requirements and enable the detection of errors and fraud. Proper record-keeping is essential for audits, financial reporting, and decision-making processes within an organization.

Question 7

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

Accepted Answer

While technologically advanced accounting systems have efficient automated processes, errors can still occur due to input errors, programming errors, or system malfunctions. Therefore, monitoring and reconciliation are necessary to ensure accuracy and identify any discrepancies.

Question 8

Liquidity refers to a company's ability to pay its long-term obligations.

Accepted Answer

Liquidity refers to a company's ability to pay its short-term obligations, not its long-term obligations. Long-term obligations are generally associated with solvency.

Question 9

Insuring assets and requiring all accounting personnel to have CPA licenses are two important principles of internal control.

Accepted Answer

Insuring assets is a principle of internal control, but requiring all accounting personnel to have CPA licenses is not necessarily a principle. While having qualified and trained employees is important, there are other ways to ensure competency and knowledge, such as requiring specific education and experience, providing ongoing training and development, and implementing strict policies and procedures.

Question 10

Cash-only sales policies or offering early payment discounts are not considered effective cash management policies.

Accepted Answer

Cash-only sales policies and early payment discounts can both be effective cash management strategies. Cash-only policies can reduce the risk of bad debts and help the business maintain a steady cash flow, while early payment discounts can incentivize customers to pay quickly and improve the business's cash position.

Question 11

Collusion is a form of fraud where two or more individuals collaborate to circumvent separation of duties.

Accepted Answer

Collusion involves individuals working together to commit fraud by circumventing established controls, such as separation of duties, to gain an advantage. Therefore, the statement is true.

Question 12

Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.

Accepted Answer

The answer of Cash equivalents are short-term highly liquid investment...

Question 13

Because employees know that bonding is an insurance policy against loss from theft, bonding does not generally discourage loss from theft.

Accepted Answer

The statement is contradictory. The correct statement should be: "Because employees know that bonding is an insurance policy against loss from theft, bonding may discourage loss from theft."

Question 14

According to good internal control policies, a person who controls an asset also maintains that asset's accounting records.

Accepted Answer

The answer of According to good internal control policies, a...

Question 15

A properly designed internal control system is a key part of systems design, analysis, and performance.

Accepted Answer

A well-designed internal control system is essential for effective risk management, compliance with laws and regulations, protection of assets, and achievement of organizational goals. Therefore, it is an integral part of systems design, analysis, and performance.

Question 16

Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

Accepted Answer

Internal control in technologically advanced accounting systems depends on both the design and operation of the information system as well as the analysis of its resulting documents. Both aspects are critical in ensuring the accuracy and integrity of financial information.

Question 17

Establishing responsibilities and assigning both the recordkeeping and custody of assets to one person are important principles of internal control.

Accepted Answer

Establishing a separation of duties, rather than assigning both recordkeeping and custody to one person, is an important principle of internal control. This helps to prevent errors and fraud by ensuring that no one person has complete control over a process or transaction.

Question 18

An internal control system consists of the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

Accepted Answer

This statement accurately describes what an internal control system is and what it aims to achieve.

Question 19

Money orders, cashier's checks, and certified checks are all examples of cash.

Accepted Answer

The answer of Money orders, cashier's checks, and certified checks...

Question 20

Effective cash management includes making efforts to pay bills on the earliest possible day.

Accepted Answer

Effective cash management involves paying bills on time, but not necessarily at the earliest possible day, to optimize cash flow and maintain liquidity.

Quiz 6: Reporting and Analyzing Cash and Internal Controls