KA2e_SelfStudy_Ch07

KA2e_SelfStudy_Ch07 -...

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File: ch07, Chapter 7: Internal Control and Cash Multiple Choice 1. Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to: a) safeguard its assets. b) prevent fraud. c) produce correct financial statements. d) deter employee dishonesty. Ans: a Response A: Correct! Response B: Internal controls are implemented specifically to safeguard assets and to enhance the accuracy and reliability of accounting records, and only incidentally to prevent fraud. Response C: Internal controls are implemented specifically to safeguard assets and to enhance the accuracy and reliability of accounting records, and indirectly to produce correct financial statements. Response D: Internal controls are implemented specifically to safeguard assets and to enhance the accuracy and reliability of accounting records, not to deter employee dishonesty. 2. The principles of internal control do not include: a) establishment of responsibility. b) documentation procedures. c) financial performance measures. d) independent internal verification. Ans: c Response A: The establishment of responsibility is one of the principles of internal control. Response B: Documentation procedures is one of the principles of internal control. Response C: Correct! Response D: Independent internal verification is one of the principles of internal control. 3. Physical controls do not include: a) safes and vaults to store cash. b) independent bank reconciliations. c) locked warehouses for inventories. d) bank safety deposit boxes for important papers. Ans: b Response A: Safes and vaults to store cash are physical controls. Response B: Correct!
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KA2e_SelfStudy_Ch07 -...

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