Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
|
Controls in a computer-based information system are identical to controls in a manual system A. True B. False |
False |
|
|
Preventative controls are passive techniques designed to reduce fraud True or False |
True |
|
|
Which is true A. The external auditor is responsible for establishing and maintaining the intetnal control system B. A key modifying assumption in internal control is that the internal control system is the responsibility of management C. Section 404 requires that corporate management certify their organization's internal controls on a quarterly and annual basis D. Section 302 requires the management of public companies to assess and formally report on the effectiveness of their organization's internal controls |
B. A key modifying assumption in internal control is that the internal control system is the responsibility of management |
|
|
Which of the following situations is not a segregation of duties violation:
a. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low. c. The sales manager has the responsibility to approve credit and the authority to write off accounts. d. The department time clerk is given the undistributed payroll checks to mail to absent employees. e. The accounting clerk who shares the record-keeping responsibility for the accounts receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger and the control account. |
b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low. |
|
|
Which of the following is not an example of independent verification? a. comparing fixed assets on hand to the accounting records b. performing a bank reconciliation
c. comparing the accounts payable subsidiary ledger to the control account d. permitting authorized users only to access the accounting system |
d. permitting authorized users only to access the accounting system |
|
|
The board of directors consists entirely of personal friends of the chief executive officer. This indicates a weakness in a. the accounting system b. the control environment c. control procedures d. this is not a weakness |
B. The control environment |
|
|
An accounting system that maintains an adequate audit trail is implementing which internal control procedure? a. access controls b. segregation of functions c. independent verification d. accounting records |
D. Accounting records |
|
|
When duties cannot be segregated, the most important internal compensating control procedure is a. supervision b. independent verification c. access controls d. accounting records |
Supervision |
|
|
The decision to extend credit beyond the normal credit limit is an example of a. independent verification
b. authorization
c. segregation of functions
d. supervision |
Authorization |
|
|
Which of the following is not an element of the internal control environment? a. management philosophy and operating style b. organizational structure of the firm c. well-designed documents and records d. the functioning of the board of directors and the audit committee |
c. well-designed documents and records |
|
|
11. Which of the following suggests a weakness in the internal control environment? a. the firm has an up-to-date organizational chart b. monthly reports comparing actual performance to budget are distributed to managers c. performance evaluations are prepared every three years d. the audit committee meets quarterly with the external auditors |
c. performance evaluations are prepared every three years |
|
|
Which of the following indicates a strong internal control environment? a. the internal audit group reports to the audit committee of the board of directors b. there is no segregation of duties between organization functions c. there are questions about the integrity of management d. adverse business conditions exist in the industry |
d. adverse business conditions exist in the industry |
|
|
The concept of reasonable assurance suggests that a. the cost of an internal control should be less than the benefit it provides b. a well-designed system of internal controls will detect all fraudulent activity c. the objectives achieved by an internal control system vary depending on the data processing method d. the effectiveness of internal controls is a function of the industry environment |
a. the cost of an internal control should be less than the benefit it provides |
|
|
The office manager forgot to record in the accounting records the daily bank deposit. Which control procedure would most likely prevent or detect this error? a. segregation of duties b. independent verification c. accounting records d. supervision |
B. Independent verification |
|
|
When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity? a. segregation of duties b. accounting records c. accounting system d. access controls |
A. Segregation of duties |
|
|
Most cost-effective control A. Preventative B. Detective C. Corrective |
Preventative |
|
|
A well-designed purchase order A. Preventative B. Detective C. Corrective |
Preventative |
|
|
A physical inventory count A. Preventative B. Detective C. Corrective |
Detective |
|
|
Bank reconciliation A. Preventative B. Detective C. Corrective |
Detective |
|
|
Credit check before approving a a sale on account Preventative Detective Corrective |
Preventative |
