Question 1

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement?
A)Fidelity bonds for key employees
B)Careful hiring procedures for key employees
C)Having a Code of Conduct
D)Required vacations for key employees

Accepted Answer

The answer of Which of the following personnel policies would...

Question 2

When assessing a company's internal control structure policies and procedures, the primary consideration is whether they
A)Prevent management override
B)Relate to the control environment
C)Reflect management's philosophy and operating style
D)Affect the financial statement assertions

Accepted Answer

The primary consideration when assessing a company's internal control structure policies and procedures is whether they affect the financial statement assertions. This is because the main objective of internal controls is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP).

Question 3

Which of the following factors best describes the "control environment" of a firm?
A)The integrity, ethical values, and competence of employees
B)Management's philosophy and operating style
C)The way management assigns authority and responsibility
D)The direction and attention provided by the board of directors
E)all of the above

Accepted Answer

The control environment of a firm is influenced by all of the factors listed – the integrity, ethical values, and competence of employees, management's philosophy and operating style, the way management assigns authority and responsibility, and the direction and attention provided by the board of directors. These factors collectively shape the organization's culture and set the tone for how business is conducted, influencing the effectiveness and efficiency of the firm's internal control system.

Question 4

Which one of the following functions performed in an organization is a violation of internal control?
A)A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the cheques daily along with a listing of the cash receipts)to the Cashier for deposit
B)A mail clerk opening the mail compares the cheque received with the source document accompanying the payment, noting the amount paid, then forwards the source documents that accompany the payments along with a listing of the cash receipts)to Accounts Receivable, on a daily basis, for posting to the subsidiary ledger
C)At the end of the week the Cashier prepares a deposit slip for all of the cash receipts received during the week
D)The General Ledger clerk compares the summary journal entry, received from the Cashier for cash receipts applicable to outstanding accounts, with the batch total for posting to the Subsidiary Ledger by the Accounts Receivable clerk

Accepted Answer

The answer of Which one of the following functions performed...

Question 5

Which one of the following types of audits would be most likely to focus on objectives related to the efficient use of resources?
A)Compliance audit
B)Information systems audit
C)Independent audit
D)Operational audit

Accepted Answer

An operational audit is most likely to focus on objectives related to the efficient use of resources because it is concerned with evaluating the effectiveness and efficiency of an organization's operations, including its use of resources. Compliance audits focus on whether an organization is adhering to legal and regulatory requirements, information systems audits focus on the controls and security of an organization's information systems, and independent audits are conducted by external auditors to provide an opinion on the fairness of an organization's financial statements.

Question 6

Many organizations have an internal audit function that makes periodic reviews of each department within the organization.The focus of these reviews is to:
A)Conduct an investigation of each department to be sure fraud is not taking place
B)Evaluate the efficiency and effectiveness of the department
C)Evaluate the performance of the manager of the department
D)Report to the organization's top managers and board of directors

Accepted Answer

The main purpose of an internal audit function is to evaluate the efficiency and effectiveness of each department within the organization, not to investigate fraud or evaluate the performance of individual managers. The results of the internal audit are typically reported to the organization's top management and board of directors.

Question 7

The purpose of ________________ is to identify organizational risks, analyze their potential in terms of costs and likelihood of occurrence, and install those controls whose projected benefits outweigh their costs.
A)Internal controls
B)A control environment
C)Risk assessment
D)Management consultants

Accepted Answer

The description given matches the purpose of risk assessment, which involves identifying potential risks, analyzing their potential impacts and likelihood, and deciding on the best course of action to manage and control them. Internal controls, a control environment, and management consultants are related to risk assessment in that they may be used as tools or resources to help identify and manage risks, but they are not the primary purpose of risk assessment.

Question 8

Which one of the following would be most effective in deterring the commission of fraud?
A)Policies of strong internal control, segregation of duties, and requiring employees to take vacations
B)Policies of strong internal control and punishments for unethical behaviour
C)Employee training, segregation of duties, and punishment for unethical behaviour
D)Hiring ethical employees, employee training, and segregation of duties

Accepted Answer

Strong internal controls, segregation of duties, and requiring employees to take vacations are effective deterrents against fraud as they create checks and balances, reduce opportunities for fraud, and ensure oversight.

Question 9

Which one of the following methods, for the distribution of employees' paycheques, would provide the best internal control for the organization?
A)Delivery of the paycheques to each department supervisor, who in turn would distribute paycheques directly to the employees in his/her department
B)Direct deposit in each employee's personal bank account
C)Distribution of paycheques directly to each employee by a representative of the Human Resource department
D)Distribution of paycheques directly to each employee by the payroll manager

Accepted Answer

Direct deposit minimizes the risk of fraud, errors, and unauthorized access to paycheques, providing a secure and efficient method of payment.

Quiz 9: Introduction to Internal Control Systems

Which of the following personnel policies would be the most useful in mitigating fraud or embezzlement?

When assessing a company's internal control structure policies and procedures, the primary consideration is whether they

Which of the following factors best describes the "control environment" of a firm?

Which one of the following functions performed in an organization is a violation of internal control?

Which one of the following types of audits would be most likely to focus on objectives related to the efficient use of resources?

Many organizations have an internal audit function that makes periodic reviews of each department within the organization.The focus of these reviews is to:

The purpose of ________________ is to identify organizational risks, analyze their potential in terms of costs and likelihood of occurrence, and install those controls whose projected benefits outweigh their costs.

Which one of the following would be most effective in deterring the commission of fraud?

Which one of the following methods, for the distribution of employees' paycheques, would provide the best internal control for the organization?