Question 1

An example of an internal control is
A) the use of bank account.
B) all cheques are prenumbered.
C) all cheques written must have reference source documents.
D) All of these answers are correct.

Accepted Answer

All of these answers are correct as they all represent internal controls. Using a bank account helps to ensure that funds are properly secured and tracked. Prenumbered cheques help to ensure that all cheques issued are accounted for and that none can be fraudulently added to the system. Requiring reference source documents for all cheques written helps to ensure that transactions are properly authorized and recorded.

Question 2

Once an effective internal control system is in place, monitoring employees and systems is no longer required.

Accepted Answer

Monitoring is a crucial part of maintaining an effective internal control system. Without monitoring, there is no way to ensure that employees are following the established controls and that the systems are working as intended. Ongoing monitoring is necessary to detect any potential issues and ensure that the controls remain effective over time.

Question 3

The objectives of internal control are to ensure efficient operations and provide reasonable assurance of all of the following EXCEPT
A) business information is accurate.
B) assets are safeguarded and used for business purposes.
C) employees and managers comply with laws and regulations.
D) profits are maximized while minimizing spending.

Accepted Answer

The objectives of internal control are not focused on maximizing profits, but rather on ensuring efficient operations and compliance with laws and regulations while safeguarding assets and maintaining accurate business information.

Question 4

The drawer writes the cheque.

Accepted Answer

The drawer is the person who writes and signs the cheque, instructing their bank to pay the specified amount to the payee.

Question 5

Internal control over a company's assets should include the following policy:
A) Responsibilities and duties of employees will be divided.
B) All cash receipts will be deposited into the bank the same day they arrive.
C) All cash payments will be made by cheque (except petty cash).
D) All of these answers are correct.

Accepted Answer

All of the choices are important policies for internal control over a company's assets. Dividing responsibilities and duties among employees reduces the risk of fraud, depositing cash receipts promptly reduces the risk of theft, and making payments by cheque provides a paper trail and accountability. Petty cash is typically handled differently and may require cash payments. Therefore, all of the policies mentioned in the answer choices are correct for ensuring strong internal control over a company's assets.

Question 6

Endorsing a cheque
A) guarantees payment.
B) transfers the right to deposit or transfer cash.
C) cancels the transaction.
D) All of these answers are correct.

Accepted Answer

Endorsing a cheque transfers the right to deposit or transfer cash.

Question 7

When the bank pays a cheque written by the company, it would
A) credit the customer's bank account.
B) debit the customer's bank account.
C) debit the cash account on the company's books.
D) No increase or decrease is made to the company's bank account.

Accepted Answer

When a bank pays a cheque written by the company, it debits the customer's bank account, meaning it reduces the balance in the account to reflect the payment made.

Question 8

Technological controls can include all of the following EXCEPT
A) using digital keycards for access.
B) restricting social media access at work.
C) requiring passwords on all systems.
D) using personal identification scanners.

Accepted Answer

Restricting social media access at work is more related to policy controls or administrative controls rather than technological controls. Technological controls involve the use of technology to manage and protect information systems, such as digital keycards, passwords, and personal identification scanners.

Question 9

One internal control safeguard is to assign all the duties of receiving, depositing, and recording cash to one employee.

Accepted Answer

Assigning all cash handling duties to one employee creates an opportunity for theft or fraud. It is recommended to have a separation of duties where different employees handle different aspects of cash handling to prevent any individual from having too much control or access to cash.

Question 10

The drawee of the cheque is the person receiving the money.

Accepted Answer

The drawee of the cheque is the bank or financial institution where the cheque is drawn from, not the person receiving the money. The person receiving the money is known as the payee.

Question 11

When a bank debits your account, it is decreasing the balance.

Accepted Answer

When a bank debits your account, it is subtracting money from your account balance, which leads to a decrease in the overall balance.

Question 12

Using correct cash handling procedures, deposits should be made by the end of the week.

Accepted Answer

Deposits should be made daily or as soon as possible to minimize the risks associated with holding onto cash, such as theft or loss.

Question 13

Company policy for internal control should include all of the following EXCEPT
A) employees will be rotated through a variety of assignments.
B) all cheques are signed by the owner (or responsible employee) after receiving authorization to pay from the departments concerned.
C) at time of payment, all supporting invoices or documents will be stamped "paid."
D) one employee should have the total responsibility for approving purchases, authorizing payments, and signing cheques.

Accepted Answer

One employee having total responsibility for approving purchases, authorizing payments, and signing cheques is not a good internal control measure as it increases the risk of fraud and errors. A system of checks and balances are needed to ensure proper separation of duties. The other options all include good internal control measures.

Question 14

A signature card shows the signature of only the person who authorizes others in the company to sign cheques.

Accepted Answer

A signature card shows the signature of the person who is authorized to sign the cheques, not the person who authorizes others to sign.

Question 15

A deposit received by the bank will include
A) a debit to the company's bank account.
B) a credit to the company's bank account.
C) no increase or decrease is made to the company's bank account.
D) a credit to the cash account on the company's books.

Accepted Answer

A deposit received by the bank will result in a credit to the company's bank account. This means that the amount of money in the account will increase. The bank will debit its own liability account because it owes the company that amount of money. The deposit will not directly affect the cash account on the company's books because the money has not yet been withdrawn.

Question 16

When a company transfers funds among parties electronically, without the use of paper cheques it is called
A) e-commerce.
B) automated reconciliation.
C) cheque truncation.
D) electronic funds transfer.

Accepted Answer

Electronic funds transfer is the process in which a company transfers funds among parties electronically without the use of paper cheques. E-commerce refers to the buying and selling of goods and services over the internet. Automated reconciliation refers to the process of matching and verifying transactions in financial records. Cheque truncation is the process of converting physical cheques into electronic images for processing.

Question 17

The person or company to whom a cheque is payable is called the
A) payer.
B) drawer.
C) drawee.
D) payee.

Accepted Answer

The payee is the person or company who will receive the funds from the cheque. The payer is the person or company who is writing the cheque. The drawer is the person who is authorizing the payment and the drawee is typically the bank where the account is held.

Question 18

The cheque is written and signed by the
A) drawer.
B) drawee.
C) payee.
D) payer.

Accepted Answer

The drawer is the person who writes the cheque and signs it, authorizing the transfer of funds from their account to the payee's account. The drawee is the bank on which the cheque is drawn, and the payer is the person or organization who actually transfers the funds. The payee is the person or organization who receives the funds.

Question 19

A signature card is kept in the bank files so that possible forgeries could be spotted.

Accepted Answer

A signature card contains the authorized signature of the account holder and is kept in the bank's files. This helps in identifying any possible forgeries by comparing the signature on the check or withdrawal slip with the authorized signature on the signature card.

Question 20

The drawee is the
A) person who writes the cheque.
B) bank that drawer has an account with.
C) person to whom the cheque is payable.
D) person who reconciles the account.

Accepted Answer

The drawee is the bank on which the cheque is drawn and from which the cheque will be paid to the payee.

Quiz 8: Banking Procedures and Control of Cash

An example of an internal control is

Once an effective internal control system is in place, monitoring employees and systems is no longer required.

The objectives of internal control are to ensure efficient operations and provide reasonable assurance of all of the following EXCEPT

The drawer writes the cheque.

Internal control over a company's assets should include the following policy:

Endorsing a cheque

When the bank pays a cheque written by the company, it would

Technological controls can include all of the following EXCEPT

One internal control safeguard is to assign all the duties of receiving, depositing, and recording cash to one employee.

The drawee of the cheque is the person receiving the money.

When a bank debits your account, it is decreasing the balance.

Using correct cash handling procedures, deposits should be made by the end of the week.

Company policy for internal control should include all of the following EXCEPT

A signature card shows the signature of only the person who authorizes others in the company to sign cheques.

A deposit received by the bank will include

When a company transfers funds among parties electronically, without the use of paper cheques it is called

The person or company to whom a cheque is payable is called the

The cheque is written and signed by the

A signature card is kept in the bank files so that possible forgeries could be spotted.

The drawee is the