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Exam 5: Fraud, Internal Control, and Cash

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Question 71

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A voucher is an internal file that:

A)  is prepared after an invoice is received.
B)  is used as a substitute for an invoice
C)  is a collection of documents prepared at each step in the voucher system
D)  takes the place of a bank check
E)  is prepared before the company orders goods.

F) A) and B)
G) D) and E)

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Question 72

Multiple Choice

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Which of the following would be deducted from the ending cash balance per books when performing a bank reconciliation?

A) Electronic fund transfers
B) Service charges
C) Deposits in transit
D) Outstanding checks

E) C) and D)
F) A) and B)

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Question 73

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Define internal control and identify the objectives of internal control system.  

Flynn Company's monthly bank statement showed the ending balance of cash of $18,500.The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service charges of $30 and the EFT from a customer in payment of the customer's account of $1,500. -Use the information above to answer the following question.What is the up-to-date ending Cash balance?

NSF checks from customers should be a(n) ______ on a bank reconciliation.

A petty cash fund is a separate checking account used to reimburse employees for expenditures they have made on behalf of the organization.

The objectives of a company's system of internal control include all of the following except:

Outstanding checks written by the company should be a(n) ______ on the company's bank reconciliation.

When cash is received from a remote source,the accounting department then compares the total on the cash receipts list with the stamped deposit slip received from the bank.Which internal control principle is being met with this procedure?

The evaluation of the internal control system to determine whether it is working as intended is referred to as:

The use of passcodes is an example of which internal control principle?

Which of the following is not one of the internal control functions performed by a cash register?

A highly effective internal control should not be implemented if the cost is greater than the benefit.

Which of the following items will require an adjusting journal entry on a company's books?

Which of the following is not related to the segregation of duties for cash received in person?

The Sarbanes-Oxley Act (SOX)requires external auditors to test the company's internal control system.

Which of the following is not a reason why it is especially important for companies to have internal controls over cash?

Internal controls are concerned with:

The incentive element of the fraud triangle includes reasons why top management may commit fraud such as enhancing job security and obtaining bigger paychecks.

You have received the bank statement for your company's account and need to reconcile it with your general ledger cash account.Your records show an ending balance for the month of $12,722.40 while the bank's records show an ending balance of $12,367.16.The bank charged $8 in service fees and paid $26.05 in interest. All but three checks written during the month were processed by the bank without incident during the month.The three exceptions were: -Check #841 was correctly processed by the bank as $981.27 but was mistakenly recorded by you as $781.27. -Check #853 for $64.57 had not yet been processed by the bank. -Check #855 for $683.46 had not yet been processed by the bank. All but two of the deposits made during the month were processed by the bank without incident.The two exceptions were: -A customer check for $307.95,which had been deposited during the month,was returned NSF. -A deposit totaling $613.37 had not yet been processed by the bank. Required: Using the information provided above,prepare a bank reconciliation.