Question 1

Indicate whether each of the following statements about internal control and ethics is true or false.
-An internal control system consists of policies and procedures that reduce opportunities for fraud

Accepted Answer

Internal control systems are designed to ensure the integrity of financial and accounting information, prevent fraud and theft, promote operational efficiency and effectiveness, and ensure compliance with laws and regulations. One of the key objectives of internal control is to reduce opportunities for fraud. Therefore, the statement is true.

Question 2

Indicate whether each of the following statements about a bank statement is true or false.
-The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from voluntarily disclosing information that they obtained as a result of their accountant-client relationships

Accepted Answer

The confidentiality rules of the AICPA's code of ethics for CPAs do prohibit auditors from voluntarily disclosing information that they obtained as a result of their accountant-client relationships.

Question 3

Indicate whether each of the following statements about internal control and ethics is true or false.
-The absence of safety deposit boxes means that the company does not have an effective internal control system

Accepted Answer

The absence of safety deposit boxes does not necessarily mean that a company does not have an effective internal control system. Safety deposit boxes may be one component of an internal control system, but there are other controls that can be implemented to safeguard assets.

Question 4

Indicate whether each of the following statements about a bank statement is true or false.
-The confidentiality rules of the AICPA's code of ethics for CPAs do not prohibit auditors from testifying in a court of law

Accepted Answer

The confidentiality rules in the AICPA's code of ethics allow for disclosure of confidential information in response to a valid subpoena or summons, therefore auditors may testify in a court of law if subpoenaed.

Question 5

Indicate whether each of the following statements about a bank statement is true or false.
-A qualified opinion means that the financial statements are in compliance with GAAP, but the auditors have reservations about something in the financial statements

Accepted Answer

A qualified opinion is a type of auditor's opinion that indicates that the financial statements are in compliance with GAAP, but the auditors have reservations about something in the financial statements. Therefore, the statement is true.

Question 6

Indicate whether each of the following statements about internal control and ethics is true or false.
-The American Institute of Certified Public Accountants requires its members to comply with the Code of Professional Conduct

Accepted Answer

The American Institute of Certified Public Accountants requires its members to comply with the Code of Professional Conduct.

Question 7

Indicate whether each of the following statements about a bank statement is true or false.
-When an auditor is unable to perform audit procedures that are necessary to determine the financial statements' compliance with GAAP, a qualified opinion must be issued

Accepted Answer

A qualified opinion is issued when there are specific issues that are not pervasive, but if the auditor is unable to obtain sufficient evidence, they may issue a disclaimer of opinion instead.

Question 8

A bank reconciliation adjusts both the cash balance reported by the bank and the book cash balance to the true cash balance.

Accepted Answer

A bank reconciliation is used to compare the cash balance reported by the bank to the cash balance recorded in a company's accounting records (book balance). Differences can occur due to timing differences in when transactions are recorded by the bank versus the company, errors, or fraud. The purpose of the reconciliation is to identify these differences and adjust both balances to the true cash balance. Therefore, the statement "A bank reconciliation adjusts both the cash balance reported by the bank and the book cash balance to the true cash balance" is true.

Question 9

Preparing a bank reconciliation is an important internal control for a business.

Accepted Answer

Preparing a bank reconciliation helps to detect any discrepancies between the company's records and the bank's records, such as unrecorded transactions or errors. This reconciliation serves as an internal control to ensure the accuracy and completeness of financial information.

Question 10

Indicate whether each of the following statements about internal control and ethics is true or false.
-The use of safety deposit boxes is a common feature of an effective internal control system

Accepted Answer

The use of safety deposit boxes can be a common feature of an effective internal control system as it helps to secure important documents or assets.

Question 11

Indicate whether each of the following statements about a bank statement is true or false.
-A qualified opinion is the most favorable opinion that can be expressed by an independent auditor

Accepted Answer

A qualified opinion is not the most favorable opinion that can be expressed by an independent auditor. It indicates that there are some issues or limitations in the financial statements of the entity being audited.

Question 12

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

Accepted Answer

Debit memos are used to inform businesses about customers' NSF (non-sufficient funds) checks that were returned by the bank, resulting in the business not receiving the expected payment. These memos are typically included with the bank statement.

Question 13

Indicate whether each of the following statements about a bank statement is true or false.
-The confidentiality rules of the AICPA's code of ethics for CPAs only applies to audit engagements

Accepted Answer

The confidentiality rules of the AICPA's code of ethics for CPAs apply to all types of engagements, including non-audit services such as tax preparation and consulting.

Question 14

Indicate whether each of the following statements regarding internal controls is true or false.
-Administrative controls are composed of policies and procedures that are designed to safeguard assets and assure that accounting records contain reliable information

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 15

Indicate whether each of the following statements about a bank statement is true or false.
-The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from communicating with successor auditors

Accepted Answer

The statement is not related to a bank statement.

Question 16

Indicate whether each of the following statements about internal control and ethics is true or false.
-The importance of ethical conduct is recognized across a broad spectrum of accounting organizations

Accepted Answer

The importance of ethical conduct is recognized across a broad spectrum of accounting organizations, including professional associations such as the American Institute of Certified Public Accountants (AICPA) and regulatory bodies such as the Securities and Exchange Commission (SEC).

Question 17

Indicate whether each of the following statements about a bank statement is true or false.
-An unqualified opinion means that the financial statements are in compliance with GAAP without qualification, reservation, or exception

Accepted Answer

An unqualified opinion means that the financial statements are in compliance with GAAP without qualification, reservation, or exception.

Question 18

Indicate whether each of the following statements about a bank statement is true or false.
-The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from seeking legal counsel prior to disclosing information obtained in an accountant-client relationship

Accepted Answer

The statement is not about a bank statement, but about confidentiality rules in the AICPA's code of ethics for CPAs. The statement is false because the rules do not prohibit auditors from seeking legal counsel in such situations.

Question 19

Indicate whether each of the following statements regarding internal controls is true or false.
-Internal controls can be divided into accounting controls and administrative controls

Accepted Answer

This statement is true. Internal controls can be broadly classified into two categories - accounting controls and administrative controls. Accounting controls relate to the recording of financial transactions and the preparation of financial statements. Administrative controls relate to the management of operations, assets, and resources of the organization.

Question 20

Indicate whether each of the following statements about a bank statement is true or false.
-An adverse opinion indicates that the financial statements include a significant departure from GAAP

Accepted Answer

An adverse opinion is given by an auditor when they believe that the financial statements of a company contain a significant departure from GAAP (Generally Accepted Accounting Principles).

Quiz 4: Internal Controls, Accounting for Cash, and Ethics

Indicate whether each of the following statements about internal control and ethics is true or false. -An internal control system consists of policies and procedures that reduce opportunities for fraud

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from voluntarily disclosing information that they obtained as a result of their accountant-client relationships

Indicate whether each of the following statements about internal control and ethics is true or false. -The absence of safety deposit boxes means that the company does not have an effective internal control system

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs do not prohibit auditors from testifying in a court of law

Indicate whether each of the following statements about a bank statement is true or false. -A qualified opinion means that the financial statements are in compliance with GAAP, but the auditors have reservations about something in the financial statements

Indicate whether each of the following statements about internal control and ethics is true or false. -The American Institute of Certified Public Accountants requires its members to comply with the Code of Professional Conduct

Indicate whether each of the following statements about a bank statement is true or false. -When an auditor is unable to perform audit procedures that are necessary to determine the financial statements' compliance with GAAP, a qualified opinion must be issued

A bank reconciliation adjusts both the cash balance reported by the bank and the book cash balance to the true cash balance.

Preparing a bank reconciliation is an important internal control for a business.

Indicate whether each of the following statements about internal control and ethics is true or false. -The use of safety deposit boxes is a common feature of an effective internal control system

Indicate whether each of the following statements about a bank statement is true or false. -A qualified opinion is the most favorable opinion that can be expressed by an independent auditor

A business learns about customers' NSF checks through debit memos that are included with the bank statement.

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs only applies to audit engagements

Indicate whether each of the following statements regarding internal controls is true or false. -Administrative controls are composed of policies and procedures that are designed to safeguard assets and assure that accounting records contain reliable information

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from communicating with successor auditors

Indicate whether each of the following statements about internal control and ethics is true or false. -The importance of ethical conduct is recognized across a broad spectrum of accounting organizations

Indicate whether each of the following statements about a bank statement is true or false. -An unqualified opinion means that the financial statements are in compliance with GAAP without qualification, reservation, or exception

Indicate whether each of the following statements about a bank statement is true or false. -The confidentiality rules of the AICPA's code of ethics for CPAs prohibit auditors from seeking legal counsel prior to disclosing information obtained in an accountant-client relationship

Indicate whether each of the following statements regarding internal controls is true or false. -Internal controls can be divided into accounting controls and administrative controls

Indicate whether each of the following statements about a bank statement is true or false. -An adverse opinion indicates that the financial statements include a significant departure from GAAP