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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business.
(Check all that apply.)
 
The petty cashier is responsible for making payments from the petty cash fund.
The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time.
A check is drawn by the company cashier to establish the petty cash fund.
The petty cashier is responsible for keeping the cash in the fund safe.
   
At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery
expenses of $46. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to
replenish the account by choosing the correct action from those given below.
 
Cash is credited for $96
   
Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching
each to its definition on the right.
 
Outstanding check     -           a check written by the depositor that has not yet been received by the bank for payment
Deposit in transit       -           Deposit made and recorded by the depositor, but not yet recorded on the bank statement
NSF check                   -           A check written by a customer who does not have enough money in his account to cover the check.
Bank charges              -           Service fees charged by the bank
   
A petty cash fund is used for ______________ payments in order to _______ the time and cost of writing
checks for _____ amounts.
 
Small; avoid; small
   
Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book
balance on a bank reconciliation.
 
The adjusted bank balance must equal the adjusted cash balance per books.
   
Choose the items below that would be added to the book balance on a bank reconciliation.
(Check all that apply.)
 
Note collected by the bank for the depositor
Interest earned on the depositor's account
   
Identify the item below that would be subtracted from the book balance on a bank reconciliation.
 
NSF check
   
Show your understanding of what a bank reconciliation is by completing the following sentence.
Which of the following are correct regarding why management uses internal controls? (Check all that apply.)
 
Ensure reliable accounting
Urge adherence to company policies
protect assets
Promote efficient operations
   
Demonstrate the required adjusting entry needed to record a $1,000 note receivable collected by the bank
less the expense of having the bank perform the service ($30), by choosing the correct entry below.
 
Debit Cash $970; debit Collection Expense $30; and credit Note Receivable $1,000.
   
A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105.
Review the statements below and determine which is correct regarding this discrepancy. (Check all that apply.)
 
The Sales account will be credited for $100
The Cash Over and Short account will be credited for $5.
The Cash account will be debited for $105.
The extra $5 collected will be treated as a miscellaneous revenue.
   
True or false: There is no such thing as a typical revenue and collection cycle.
 
True
   
Internal control policies and procedures have limitations that arise from many elements.
Match the limitation on the left with its definition on the right.
 
Human error                                      -           Can occur from negligence, fatigue, misjudgment or confusion
Human fraud                                      -           involves intent by people to defeat internal controls for personal gain
Cost-benefit principle                        -           Dictates that the costs of internal controls must not exceed their benefits
Internal control environment           -           Management must convey commitment to internal control policies and procedures
   
The difference between control objectives of internal control and management assertions is that ______.
 
control objectives relate to operations, compliance, and financial reporting
   
COSO's definition of internal control emphasizes that it is a(n)____ , or a means to an end.
 
process
   
The three categories of objectives of ___ _____are reporting, operations, and compliance
 
internal controls
   
Segregation of duties is a ______ control.
 
preventive
   
Internal control addresses the achievement of objectives in the following areas except ______.
 
company profitability and growth
 
True or false: The COSO definition of internal control emphasizes that internal control is an end in and of itself.
False
   
The three categories of objectives of internal control are reporting,_____ , and____
 
Operations; compliance
   
The major difference between control objectives and management assertions is that control objectives ______.
 
are broader in scope
   
The company has one control that requires reconciliations of bank statements and another that requires all
cash disbursements to be authorized. This is an example of ______ controls.
 
complementary
   
A policy requiring the preparation of a monthly bank reconciliation is an example of a ______ control.
 
detective
   
Internal control is a process designed to provide ______ assurance regarding the achievement of objectives
relating to operations, reporting, and compliance.


reasonable
   
The basic principles of the control environment include all of the following except a(n) ______.
 
effective risk assessment process

 
When an organization has senior management and a board of directors that establish values and expectations
regarding appropriate behavior and lead by example, it is said to have a strong ______.
 
tone at the top
   
Two controls that both address the existence of accounts receivable are referred to as _____ controls.
 
redundant
   
The audit committee ______.
 
oversees development and performance of the organization's internal control
is directly responsible for the CPA firm performing public company audits
   
The foundation for the other internal control components is ______.
 
The control environment
   
When an organization has senior management and a board of directors that establish values and expectations
regarding appropriate behavior and lead by example, it is said to have a strong_____ at the_____
 
Tone; top
   
Which of the following are correct regarding why management uses internal controls? (Check all that apply.)
 
Ensure reliable accounting
Urge adherence to company policies
protect assets
Promote efficient operations
   
Specific authorization occurs when transactions are authorized on an individual basis while _____authorization
occurs when management establishes criteria for acceptance of a certain type of transaction.
 
general
   
An accounting information system should ______.ensure transactions are recorded in the proper time period
 
identify and record all valid transactions
measure the proper value of transactions
   
One feature of well-designed forms and documents that can be used to control the number of documents
issued and account for sequence of documents is_____ numbers.
 
serial
   
Controls that assess whether other transaction control activities are operating properly and are usually
focused on high risk transactions are called ______ controls.
 
supervisory
   
Clear guidance that will allow proper and uniform handling of transactions and events is provided by an
accounting information system's ______.
 
chart of accounts
policies and procedures manual
   
The goal of segregation of duties is not to allow an individual to have ______ duties.
 
incompatible
   
The methods and records established to initiate, authorize, record, process, summarize, and report an entity's
transactions and maintain accountability for assets, liabilities, and equity is an organization's accounting___ _____
 
Information; system
   
Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)
 
Beginning-of-period balance in the account
Deposits and other increases to the account during the period
Withdrawals and other decreases to the account during the period
End-of-period balance in the account
   
Internal auditors are representatives of ______.
 
top management
   
In addition to the typical journals, ledgers, and other record-keeping devices, a chart of accounts and manual of accounting policies and procedures should be included in an accounting___ ____
 
Information; system
   
This component of internal control assesses the quality of internal control performance over time.
 
Monitoring
   
Which of the following is NOT a reason that internal control can only provide reasonable assurance from fraud and waste?
 
All designed controls to address fraud and waste are adopted.
   
This document clearly describes the entity's methods of treating transactions which provides employees
guidance that allows for proper and uniform handling of transactions.
 
Manual of accounting policies and procedures
   
Determine which of the statements below is correct regarding information reflected on a monthly bank statement.
 
The information on the bank statement reflects the bank's records of the depositor's account.
   
Identify the statement below that describes what the Days' sales uncollected ratio assesses.
 
It measures how quickly a company can convert its accounts receivables into cash.
   
Internal auditors monitor ______.
 
departments
management
branches
   
Controls that assess whether other transaction control activities are operating properly and are usually
focused on high risk transactions are called ______ controls.
 
supervisory
   
To obtain an understanding of internal control auditors use
 
risk assessment procedure
   
Control activities designed to ensure separation of duties may be circumvented by _____ among two or more people.
 
collusion
   
Auditors use their understanding of internal control to do all of the following except ______.
 
assess detection risk for use in the audit risk model
   
For the control environment component, professional standards require auditors should obtain sufficient knowledge about the company's ______.
 
antifraud program
   
True or false: The auditors should obtain an understanding of the client's processes for eliminating business risks.
 
False
   
Describe the purpose of a purchase requisition by selecting the correct answer below. (Check all that apply.)
 
Purchase requisitions are used for control purposes.
Purchase requisitions are used to inform the purchasing department of its needs.
Managers are not allowed to place orders directly with vendors; instead, they fill out a purchase requisition.
   
Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)
 
Deposits and other credits increasing the account during the period
End-of-period balance in the account
Beginning-of-period balance in the account
Checks and other debits decreasing the account during the period
   
Determine which of the statements below is correct regarding information reflected on a monthly bank statement.
 
The information on the bank statement reflects the bank's records of the depositor's account.
Identify the statement below that describes what the Days' sales uncollected ratio assesses.
It measures how quickly a company can convert its accounts receivables into cash.
   
Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)
 
Deposits and other increases to the account during the period
End-of-period balance in the account
Withdrawals and other decreases to the account during the period
Beginning-of-period balance in the account
   
Determine which of the statements below is correct regarding information reflected on a monthly bank statement.
 
The information on the bank statement reflects the bank's records of the depositor's account.
   
The risk of misstatement is composed of _____ risk and _____ risk.
 
inherent; control
   
While obtaining an understanding of the other control components, auditors generally obtain some knowledge
about the client's ______.
 
control activities
   
The policies and procedures for processing a particular type of transactions is referred to
as the transaction_____
 
cycle
   
In making a judgment about the extent of the understanding of _____ ______ necessary, auditors should realize
the information will be used to identify types of potential misstatements and consider
 
factors that affect the risks of material misstatement.
Internal; control
   
True or false: When obtaining an understanding of the control environment, it is important that auditors focus
on the substance of controls, rather than their form.
 
true
   
Factors that may indicate increased financial reporting risk include ______.
 
changes in personnel
new business models
   
Procedures to obtain an understanding of internal control include ______.
 
inquiry of entity personnel
inspection of documents and reports
tracing of transactions through information system
   
Most internal control questionnaires are designed so that a ______ answer to a question indicates a weakness in internal control.
 
No
   
Auditors understanding of internal control should include not only the design of controls but also whether they ______.
 
have been implemented
   
The traditional method of describing internal control is to complete a(n) ______.
 
internal control questionnaire
   
Many CPA firms consider a(n) ______ to be more effective than the other methods for documenting their understanding
of a client's accounting information system and related control activities.
 
systems flowchart
   
After documenting internal control, auditors typically perform a(n)___ ___, which traces one or two transactions
through each step in the cycle.
 
walk
through
   
Auditors should identify and assess the risks of material misstatement at both the financial ___ level and the ____ ____ level.
 
statement
relevant
assertion
   
Auditors use their understanding of which internal control component to identify risks of material misstatement that relate
directly to the recording of transactions such as the recording of routine transactions like revenue?
 
information system
   
A symbolic representation of a series of procedures with each procedure shown in sequence is an example of a systems____
 
flowchart
   
True or false: To assist auditors with describing internal control in their working papers, auditors typically perform a
walk-through of one or two transactions.
 
false
   
The development of significant accounting estimates and preparation of the notes and selection and application
of significant accounting policies are examples of risks at the ___ ____ level.
 
financial
statement
   
True or false: If the auditors do an extensive job of identifying and assessing risk of material misstatement at the
relevant assertion level, it is not necessary to assess risk at the financial statement level.
 
False
   
When assessing the risk of material misstatement, auditors rely on the ______ effectiveness of internal control.
 
expected
   
When auditors assess risk at the ____ assertion level instead of the financial statement level, they consider
both the design of the control and its implementation.
 
relevant
   
Risks at the financial statement level ______.
 
require considerable judgment for the auditor
potentially affect many relevant assertions
   
After assessing the risks of material misstatement, auditors should design further audit procedures such as substantive
procedures and tests of controls if planned assessed level of control risk is ______.
 
low
   
In general, auditors want evidence on operating effectiveness throughout the audit, so they ______ the year.
 
sample throughout
   
To increase the evidence from a test of control, the number of items tested should be increased for ______.
 
non-automated controls only
   
The preliminary assessments of control risk are often referred to as the _____ assessed level of control risk.
 
planned
   
Auditors perform tests of controls to obtain evidence about operating _____ of controls
 
effectiveness
   
Segregation of duties is a control that does not leave documentary evidence so it should be tested by ______.
 
inquiring as to who performed these duties
observing the client's employees performing the duties
   
Tests of controls are generally performed ______.
 
throughout the year
   
AICPA standards require that tests of controls be performed ______ audit.
 
every third
   
True or false: The general approach to increasing evidence from a test of control is to increase the extent of
the test, except in the case of automated controls.
 
True
   
Tests of controls address ______.
 
the consistency with which controls were applied
how controls were applied
by whom or by what means the controls were applied
   
If the assessed level of control risk is high, the auditor should plan to perform more ____ procedures.
 
substantive
   
A client uses a service organization to perform its payroll function. To obtain a sufficient understanding of the
controls at the service organization, external auditors can do all of the following except ______.
 
ignore the relevant controls at the service organization and only consider the controls in place at the client
   
If the test of controls results indicate the controls are not operating as effectively as planned, the assessed
level of control risk needs to be ______ the planned assessed level.
 
higher than
   
A service department Type ______ report addresses the suitability of the design of controls
 
1
   
Regarding deficiencies and weaknesses in internal control, auditing standards require auditors to communicate in writing ______.
 
material weaknesses
significant deficiencies
   
Before performing tests of controls to determine whether they are operating effectively, auditors must first ______.
 
identify the controls likely to prevent or detect material misstatements
   
Auditors typically use a management letter to communicate deficiencies that are ______ than significant.
 
less
   
Processing services are offered to user entities by____ _____
 
Service; organizations
   
A service department Type ______ report addresses the operating effectiveness of controls.
 
2
   
A deficiency in internal control over financial reporting (or combination of deficiencies) such that there
is a reasonable possibility that a material misstatement of the company's financial statements will not
be prevented or detected on a timely basis is a(n)___ ____.
 
Material; weakness
   
Deficiencies that are less than significant are generally communicated in a(n) ____ letter.
 
management
   
Regarding deficiencies and weaknesses in internal control, auditing standards require auditors
to communicate in writing __________. (check all that apply)
 
significant deficiencies
material weaknesses
   
Which of the following are principles of internal control? (Check all that apply.)
 
Perform regular and independent reviews.
Divide responsibility for related transactions.
Establish responsibilities.
Maintain adequate records.
   
A good internal control to protect cash is to make cash payments using
 
checks
   
Each of the following are types of technological impacts related to internal control:
 
more extensive testing of records
reduced processing errors
separation of duties
new evidence of processing
   
All of the following describe blockchain:
 
blockchain is continuously and simultaneously updated and verified
blockchain makes it more difficult for the ledger to be modified without a detailed record of changes
   
Which statement below explains why liquid assets are needed in a business?
 
Liquid assets must be available to pay current liabilities.
   
The triple threat of fraud involves:
 
pressure, opportunity, rationalization
   
A well-designed organizational structure ______.
 
provides a basis for planning, directing, and controlling operations
ensures appropriate segregation of duties
   
Segregation of duties is a ______ control.
 
preventive
   
The division of responsibilities between finance and accounting illustrates how accounting is involved in
the financial operations of the business but separated from the custody of assets.
 
False
   
Independence from management and proper oversight of the development and performance of the
organization's internal control should be demonstrated by the board of directors and its ____ ______
 
Audit; committee
   
Management needs to assess risks that threaten their ability to meet their objectives in the areas of ______.
 
operations, reporting, and compliance
   
Which of the statements below describe the goals and principles of cash management? (Check all that apply.)
 
Plan cash receipts to meet cash payments when due.
Encourage quick collection of receivables.
Money should be spent only when it is available.
Keep a minimum level of cash necessary to operate.
   
What is the purpose of internal controls?
 
to protect assets and ensure reliable accounting
   
Which of the answers below correctly describe the Cash Over and Short account? (Check all that apply.)
 
It records the effects of cash overages and cash shortages.
It is an income statement account.
A debit balance reflects an expense.
   
Identify the basic internal control guidelines which should be in place to protect a business's cash by
selecting the correct answers below. (Check all that apply.)
 
Handling cash is separate from recordkeeping of cash.
Cash receipts are promptly deposited in a bank.
Cash payments are made by check.
   
Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used
for (large/small) payments.
 
Small
   
Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)
 
Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry.
Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft.
Technology has reduced the number of processing errors.
   
The organizational structure of an organization should separate responsibilities for _____of transactions,
record keeping for transactions, and _____ of assets.
 
authorization
custody
   
The acceptable level of variation in performance relative to the achievement of objectives is called ______.
 
risk tolerance
   
Exiting an activity that gives rise to a risk is an example of risk___
 
Avoidance
   
Match the banking term on the left with its definition on the right.
 
Deposit Ticket                        -           Lists currency, coins and checks deposited into an account
Check                                      -           A document signed by the depositor instructing the bank to pay a specified amount of money
Bank Account                         -           Used to deposit money for safekeeping and help control withdrawals.
Remittance advice                 -           Explains the reason for payment
Electronic Funds transfer      -           Electronic transfer of cash from one party to another
   
Risk assessment is management's process for ______.
 
analyzing risks
identifying risks
   
To enhance the control environment, management should do all of the following except ______.
 
make sure one person authorizes transactions, records transactions, and has custody of assets
   
Policies and procedures that help mitigate the risk that the organization's objectives are not met are called control ____
 
activities
   
The rule that management must approve all credit sales over $75,000 is an example of a(n) ______ authorization.
 
Specific
   
Identify which of the items below are goals of good cash management. (Check all that apply.)
 
Keep a minimum level of cash necessary to operate.
Plan cash receipts to meet cash payments when due.
   
Determine which of the statements below is correct regarding information reflected on a monthly bank statement.
 
The information on the bank statement reflects the bank's records of the depositor's account.
   
One feature of well-designed forms and documents that can be used to control the number of documents
issued and account for sequence of documents is ______.
 
serial numbers
   
Controls that assess whether other transaction control activities are operating properly and are usually
focused on high risk transactions are called ___________ controls.
 
supervisory
   
All of the following are examples of control activities except ______.
 
tone at the top
   
A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105.
Review the statements below and determine which is correct regarding this discrepancy. (Check all that apply.)
 
The Sales account will be credited for $100
The Cash Over and Short account will be credited for $5.
The Cash account will be debited for $105.
The extra $5 collected will be treated as a miscellaneous revenue.
   
Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)
 
The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger
Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation
We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two
   
Review the following statements and select the ones which accurately describe a Petty Cash fund.
Select all answers which apply.
 
It is an asset reported on the balance sheet.
It is established to pay for small payments like low-cost supplies and shipping fees, etc.
   
Each of the following are types of technological impacts related to internal control:
 
separation of duties
new evidence of processing
reduced processing errors
more extensive testing of records
   
Determine which of the statements below accurately describe services provided by a bank. (Check all that apply.)
 
Each bank deposit is supported by a deposit ticket.
To withdraw money from an account, the depositor can use a check.
A bank account is a record set up by a bank for a customer.
   
Select the items below that would cause the bank statement balance to differ from the depositor's book balance.
 
NSF check, Deposit in transit, interest paid by bank
   
Proper segregation of duties should be applied to ______.
 
departments and individuals

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2