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Exam 5: Fraud, Internal Control, and Cash

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Question 1

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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 was the cash balance on the company's books (before the adjustments for items on the bank reconciliation) ?

A) $18,000
B) $17,230
C) $19,000
D) $20,270

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

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Question 2

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Which principle of internal control states that you should not make one employee responsible for all parts of a transaction?

A) Responsibility centers
B) Separation of duties
C) Restrict access
D) Procedure documentation

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

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Question 3

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The principles of internal control include which of the following?

Fraud is best defined as:

A check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period.In preparing the bank reconciliation for this period,the amount of this check should be

Which of the following statements concerning electronic funds transfers is not correct?

Internal controls include the policies and procedures a company implements to promote efficient and effective operations,protect assets,enhance accounting information,and adhere to laws and regulations.

In comparing the canceled checks on the bank statement with the entries in the accounting records,it is found that check number 2889 for December's utilities was correctly written and drawn for $790 but was erroneously entered into the accounting records as $970.The journal entry to adjust the books for the bank reconciliation would include a debit to:

A small company would have the most difficulty in implementing which of the following internal control principles?

Which of the following is not a commonly used internal control?

At the end of the day,the cash register's record shows $957,but the count of cash in the register is $965.Prepare the journal entry to record the day's cash sales.

Identify the purpose of a voucher system and describe a voucher.

Why was the Sarbanes-Oxley Act (SOX) enacted?

Most companies pay salaries and wages to employees through EFTs,which are known by Employees as:

Which of the following is not one of the control components that are part of the framework used when analyzing an internal control system?

For each of the following events,match the event with the section of the bank reconciliation in which it is listed,if at all,and indicate the operation performed.

From the creditor's perspective,what is the purpose of loan covenants?

Physically locking up assets and electronically securing other assets and information is required by the internal control principle of:

Choose the appropriate letter to match the term and the definition.There are more definitions than terms. 1.____ Bank Reconciliation 2.____ Cash 3.____ Cash Equivalents 4.____ NSF (Not Sufficient Funds)Check 5.____ Restricted Cash Definition A.A process for approving and documenting all purchases and payments on account. B.A process that controls the amount paid to others by limiting the total amount of money available for making payments to others. C.A set of regulations passed by Congress in 2002 in an attempt to improve financial reporting and restore investor confidence. D.Actions taken to promote efficient and effective operations,protect assets,enhance accounting information,and adhere to laws and regulations. E.An attempt to deceive others for personal gain. F.An internal control designed into the accounting system to prevent an employee from making a mistake or committing a dishonest act as part of one assigned duty and then also covering it up through another assigned duty. G.An internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual. H.Another name for bounced checks.They arise when the check writer (your customer)does not have sufficient funds to cover the amount of the check. I.Money or any instrument that banks will accept for deposit and immediately credit to a company's account. J.Not available for general use but rather restricted for a specific purpose. K.Short-term,highly liquid investments purchased within three months of maturity. L.Terms of a loan agreement that if broken,entitle the lender to renegotiate loan terms or force repayment.

Which element is not part of the fraud triangle?