Question 1

Indicate whether each of the following statements about separation of duties is true or false.
-Making one employee responsible for authorization and recording of transactions does not violate the principles of good internal control

Accepted Answer

Separation of duties requires that different individuals be responsible for authorization, recording, and custody of assets to ensure that no one person has complete control over a transaction. Therefore, making one employee responsible for authorization and recording of transactions violates the principles of good internal control.

Question 2

Indicate whether each of the following statements about separation of duties is true or false.
-When a business achieves a clear separation of duties, the work of one employee acts as a check on the work of other employees

Accepted Answer

This is true. Separation of duties ensures that no one employee has complete control over a particular task, which helps to prevent errors, fraud, and misconduct. By assigning different tasks to different employees, each worker acts as a check on the others, increasing accountability and reducing the risk of mistakes or abuse.

Question 3

Indicate whether each of the following statements about separation of duties is true or false.
-Having a clear separation of duties will reduce employees' temptation to commit theft or fraud

Accepted Answer

Separation of duties is a key control measure that helps to prevent fraud and errors by ensuring that critical tasks are divided among multiple employees, which reduces the likelihood of any one person being able to commit fraud undetected. By separating duties, employees are less likely to have the opportunity or ability to steal or manipulate data without being detected.

Question 4

Indicate whether each of the following statements regarding internal controls is true or false.
-Cash receipts should be deposited in a bank on a periodic basis such as once a week

Accepted Answer

Cash receipts should be deposited in a bank daily to minimize the risk of theft or loss and to ensure accurate financial records.

Question 5

Indicate whether each of the following statements about separation of duties is true or false.
-One employee should not be responsible for both making cash sales to customers and recording the transaction in the business's accounting records

Accepted Answer

Separation of duties is an important principle of internal control in which different individuals are responsible for different aspects of a transaction or process to prevent errors or fraud. In this case, separating the responsibilities of making cash sales and recording the transactions helps to ensure that all sales are properly recorded and that there are multiple checks and balances in place to prevent errors or fraud.

Question 6

Indicate whether each of the following statements about separation of duties is true or false.
-When a company has achieved an effective separation of duties, collusion among employees would be required to commit theft or fraud and avoid detection

Accepted Answer

Separation of duties is a key internal control that involves dividing responsibilities for a particular process or task among different people. When properly implemented, it ensures that no one person has complete control over a process or transaction, reducing the risk of errors or fraud. By separating duties among different employees, collusion becomes more difficult, as multiple people would need to work together to commit a fraud or theft and avoid detection. Therefore, the statement is true.

Question 7

Indicate whether each of the following statements regarding internal controls is true or false.
-Under proper internal controls, employees who are given authority should not bear the corresponding responsibility

Accepted Answer

Under proper internal controls, employees who are given authority should also bear the corresponding responsibility. This ensures accountability and helps prevent fraud or errors.

Question 8

Indicate whether each of the following statements regarding internal controls is true or false.
-The design of the internal control system varies from company to company

Accepted Answer

Internal controls are designed by organizations to meet their specific needs and requirements, and therefore can vary from company to company.

Question 9

Indicate whether each of the following statements regarding internal controls is true or false.
-All spoiled and voided checks should be defaced and retained

Accepted Answer

Spoiled and voided checks should be defaced and retained as a control measure to prevent fraud or misuse. This ensures that they cannot be reused or altered for fraudulent activities. Retaining these checks also aids in record-keeping and auditing purposes.

Question 10

Indicate whether each of the following statements regarding internal controls is true or false.
-Separation of duties is an internal control element that would require different individuals to perform the functions of authorization, recording of transactions, and custody of assets

Accepted Answer

This statement is true. Separation of duties is a crucial internal control element that ensures that different individuals perform the functions of authorization, recording of transactions, and custody of assets to prevent fraud and errors. This helps in ensuring the accuracy and reliability of financial reporting.

Question 11

Indicate whether each of the following statements regarding internal control is true or false.
-Cash is most susceptible to embezzlement at the points of receipt and disbursement

Accepted Answer

Cash is most vulnerable to fraud and embezzlement at the points of receipt and disbursement because it involves physical handling and exchange of money. Therefore, it is important to establish strong internal controls at these points.

Question 12

Indicate whether each of the following statements regarding internal controls is true or false.
-Internal controls provide complete assurance that the objectives of an enterprise will be accomplished

Accepted Answer

Internal controls provide reasonable assurance that the objectives of an enterprise will be accomplished, but they cannot guarantee complete assurance due to the possibility of human error or unforeseen circumstances.

Question 13

Indicate whether each of the following statements regarding internal control is true or false.
-A fidelity bond is liability insurance that protects a company against certain lawsuits filed by customers

Accepted Answer

A fidelity bond is not liability insurance, but rather it is an insurance policy that protects a company against losses caused by employee dishonesty or fraud.

Question 14

Indicate whether each of the following statements regarding internal control is true or false.
-Accounting controls are composed of procedures designed to safeguard the assets of a business and to ensure that its accounting records contain reliable information

Accepted Answer

This statement is true. Accounting controls are designed to protect a business's assets from loss, theft, or misuse and to ensure that its financial records are accurate and reliable. These controls can include procedures such as establishing segregation of duties, implementing security measures, and conducting regular audits.

Question 15

Indicate whether each of the following statements regarding internal control is true or false.
-Administrative controls are concerned with the reliability of a business's financial statements

Accepted Answer

Administrative controls are concerned with policies and procedures that ensure the efficient and effective operation of a business, but are not specifically focused on the reliability of financial statements. This responsibility falls under the purview of accounting and financial controls.

Question 16

Indicate whether each of the following statements regarding internal controls is true or false.
-Accounting controls are concerned with the evaluation of performance and the assessment of the degree of compliance with company policies and public laws

Accepted Answer

Accounting controls are actually concerned with the accuracy and reliability of financial statements and other accounting records. Performance evaluation and compliance assessment fall under management controls.

Question 17

Indicate whether each of the following statements regarding internal controls is true or false.
-It is against the basic rules of internal control to require employees to take regular vacations

Accepted Answer

It is true that requiring employees to take regular vacations can be a part of a good internal control system. This ensures that different employees are handling tasks at different times, reduces the risk of fraud or errors going undetected, and provides an opportunity for other employees to cross-train and develop new skills.

Question 18

Indicate whether each of the following statements regarding internal control is true or false.
-Whenever possible, the functions of authorization, recording transactions, and custody of assets should be exercised by the same dependable employee

Accepted Answer

The functions of authorization, recording transactions, and custody of assets should be separated among different employees to prevent fraud and errors. This is known as the principle of segregation of duties, which ensures that no single person has too much control over a process.

Question 19

Indicate whether each of the following statements regarding internal controls is true or false.
-Under proper internal controls, the person who collects customer payments should also maintain the accounting records of cash receipts

Accepted Answer

It is important to have segregation of duties in internal controls. The person who collects customer payments should not also maintain the accounting records of cash receipts, as this increases the risk of fraud or errors. These duties should be separated to ensure proper checks and balances.

Question 20

Indicate whether each of the following statements regarding internal controls is true or false.
-A fidelity bond is a form of insurance that companies buy to protect themselves from loss due to employee dishonesty

Accepted Answer

A fidelity bond is a type of insurance purchased by companies to protect themselves from losses due to employee dishonesty.

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

Indicate whether each of the following statements about separation of duties is true or false. -Making one employee responsible for authorization and recording of transactions does not violate the principles of good internal control

Indicate whether each of the following statements about separation of duties is true or false. -When a business achieves a clear separation of duties, the work of one employee acts as a check on the work of other employees

Indicate whether each of the following statements about separation of duties is true or false. -Having a clear separation of duties will reduce employees' temptation to commit theft or fraud

Indicate whether each of the following statements regarding internal controls is true or false. -Cash receipts should be deposited in a bank on a periodic basis such as once a week

Indicate whether each of the following statements about separation of duties is true or false. -One employee should not be responsible for both making cash sales to customers and recording the transaction in the business's accounting records

Indicate whether each of the following statements about separation of duties is true or false. -When a company has achieved an effective separation of duties, collusion among employees would be required to commit theft or fraud and avoid detection

Indicate whether each of the following statements regarding internal controls is true or false. -Under proper internal controls, employees who are given authority should not bear the corresponding responsibility

Indicate whether each of the following statements regarding internal controls is true or false. -The design of the internal control system varies from company to company

Indicate whether each of the following statements regarding internal controls is true or false. -All spoiled and voided checks should be defaced and retained

Indicate whether each of the following statements regarding internal controls is true or false. -Separation of duties is an internal control element that would require different individuals to perform the functions of authorization, recording of transactions, and custody of assets

Indicate whether each of the following statements regarding internal control is true or false. -Cash is most susceptible to embezzlement at the points of receipt and disbursement

Indicate whether each of the following statements regarding internal controls is true or false. -Internal controls provide complete assurance that the objectives of an enterprise will be accomplished

Indicate whether each of the following statements regarding internal control is true or false. -A fidelity bond is liability insurance that protects a company against certain lawsuits filed by customers

Indicate whether each of the following statements regarding internal control is true or false. -Accounting controls are composed of procedures designed to safeguard the assets of a business and to ensure that its accounting records contain reliable information

Indicate whether each of the following statements regarding internal control is true or false. -Administrative controls are concerned with the reliability of a business's financial statements

Indicate whether each of the following statements regarding internal controls is true or false. -Accounting controls are concerned with the evaluation of performance and the assessment of the degree of compliance with company policies and public laws

Indicate whether each of the following statements regarding internal controls is true or false. -It is against the basic rules of internal control to require employees to take regular vacations

Indicate whether each of the following statements regarding internal control is true or false. -Whenever possible, the functions of authorization, recording transactions, and custody of assets should be exercised by the same dependable employee

Indicate whether each of the following statements regarding internal controls is true or false. -Under proper internal controls, the person who collects customer payments should also maintain the accounting records of cash receipts

Indicate whether each of the following statements regarding internal controls is true or false. -A fidelity bond is a form of insurance that companies buy to protect themselves from loss due to employee dishonesty