Multiple choice

1. To overstate earnings, a company can

A. overstate expenses and overstate revenue.

B. overstate receivables and understate payables.

C. understate unearned revenue and understate property, plant, and equipment.

D. understate expenses and understate revenue.

2. Physical inventory counts must be done

A. when using bar-code scan technology.

B. when using the periodic method of inventory.

C. regardless of method inventory.

D. when using the perpetual method of inventory

3. Which of the following may not limit the effectiveness of internal control systems in an organization?

A. Poorly designed controls

B. Duties not segregated

C. Costs not worth benefits

D. Understanding of policies and procedures

4. If current assets decrease and current liabilities increase, the current ratio

A. decreases.

B. remains the same.

C. will change based on the change in total assets.

D. increases.