FIN 534 Quiz 9

FIN 534 Quiz 9

Question 1 

The Sarbanes-Oxley Act requires that all U.S. corporations under the juris-diction of the Securities and Exchange Commission

maintain an adequate system of internal control.

must file reports with the National Commission on Fraudulent Financial Reporting.

have at least one foreign subsidiary.

maintain accounting records of foreign branches and subsidiaries in the local foreign currency.

Question 2 

The control principle related to not having the same person authorize and pay for goods is known as

segregation of duties.

establishment of responsibility.

independent internal verification.

rotation of duties.

Question 3 

Maximum benefit from independent internal verification is obtained when

it is done by the employee possessing custody of the asset.

discrepancies are reported to management.

it is done at the time of the audit.

it is made on a pre-announced basis.

Question 4 

Allowing only designated personnel to handle cash receipts is an example of

documentation procedures.

independent internal verification.

establishment of responsibility.

segregation of duties.

Question 5 

Storing cash in a company safe is an application of which internal control principle?

Segregation of duties

Documentation procedures

Physical controls

Establishment of responsibility

Question 6 

Reconciling the bank statement monthly is an example of

independent internal verification.

documentation procedures.

establishment of responsibility.

segregation of duties.

Question 7 

A voucher system is a series of prescribed control procedures

to check the credit worthiness of customers.

which eliminates the need for a sales journal.

designed to assure that disbursements by check are proper.

specifically designed for small firms who may not have checking accounts.

Question 8 

The size of the petty cash fund is dependent on

the size of the regular cash account.

the wishes of the custodian of the fund.

anticipated disbursements for the year.

anticipated disbursements for a three- to four-week period.

Question 9 

A $100 petty cash fund has cash of $18 and receipts of $86. The journal entry to replenish the account would include a

credit to Petty Cash for $86.

credit to Cash for $86.

debit to Cash for $86.

credit to Cash Over and Short for $4.

Question 10 

A check returned by the bank marked "NSF" means

no signature found.

not sufficient funds.

no service fee.

not satisfactorily filled-out.

Question 11 

A bank reconciliation should be prepared

by the person who is authorized to sign checks.

when an employee is suspected of fraud.

to explain any difference between the depositor's balance per books and the balance per bank.

whenever the bank refuses to lend the company money.

Question 12 

Deposits in transit

have been recorded on the company's books but not yet by the bank.

have not been recorded by the bank or the company.

are checks from customers which have not yet been received by the company.

have been recorded by the bank but not yet by the company.

Question 13 

When making a payment from the petty cash fund for postage stamps, the following journal entry is made.

a. Office Supplies XXXX

Petty Cash XXXX

b. Postage Expense XXXX

Petty Cash XXXX

c. Miscellaneous Expense XXXX

Petty Cash XXXX

d. No entry is made.

d.

c.

a.

b.

Question 14 

A bank may issue a credit memorandum for

the collection of a note receivable for the depositor by the bank.

a bank service charge.

an NSF (not sufficient funds) check from a customer.

the cost of printing checks.

Question 15 

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash with maturities of

1 month or less when purchased.

1 year or less when purchased.

6 months or less when purchased.

3 months or less when purchased.