Question 1

An internal control system refers to the policies and procedures companies use to protect assets,ensure reliable accounting,promote efficient operations and urge adherence to company policies.

Accepted Answer

An internal control system is designed to achieve those objectives, as described in the statement. Therefore, the statement is true.

Question 2

Separation of duties divides responsibility for a transaction or a series of transactions between two or more individuals or departments.Separation of duties reduces the risk of error and fraud.

Accepted Answer

Separation of duties is a best practice to reduce the risk of error and fraud in a transaction or a series of transactions by dividing responsibility between two or more individuals or departments. This ensures that no single person has complete control over a transaction, thereby minimizing the potential for mistakes, intentional or unintentional.

Question 3

The use of internal controls provides guaranteed protection against losses due to operating activities.

Accepted Answer

Internal controls can help reduce the risk of losses, but they cannot completely eliminate the possibility of losses due to various factors such as human error, fraud, or external events.

Question 4

Internal control policies and procedures are the same for all companies.

Accepted Answer

Internal control policies and procedures may differ depending on the specific company, its industry, size, and other factors.

Question 5

The principles of internal control include: establish responsibilities,maintain adequate records,insure assets,separate recordkeeping from custody of assets and perform regular and independent reviews.

Accepted Answer

These are indeed the principles of internal control, as outlined in many accounting textbooks and frameworks such as COSO.

Question 6

Internal control systems used to monitor and control operations are a low priority for managers within the company.

Accepted Answer

Internal control systems are important for managers to ensure that company operations are effective, efficient, and comply with regulations. Neglecting internal controls can lead to a higher risk of fraud, errors, and mismanagement. Therefore, internal control systems should be given high priority by managers.

Question 7

Technology such as cash registers,check protectors,time clocks and personal identification scanners can increase the strength of internal controls.

Accepted Answer

Technology can increase the strength of internal controls by automating processes, reducing the likelihood of errors and providing a record of transactions. Cash registers, check protectors, time clocks, and personal identification scanners are examples of technology that can enhance internal controls.

Question 8

Liquidity refers to a company's ability to pay its short-term obligations.

Accepted Answer

Liquidity specifically refers to a company's ability to meet its short-term obligations, such as paying bills and debts that are due within a year or less.

Question 9

Bonding does not discourage employees from stealing from the company as employees know that bonding is an insurance policy against loss from theft.

Accepted Answer

Bonding may discourage some employees from stealing due to the risk of being caught and losing their job, but it does not remove the incentive completely. Additionally, employees may still steal with the knowledge that bonding will cover the loss, leading to higher insurance premiums for the company.

Question 10

Proper internal control means that the responsibility for a task is clearly established and assigned to one person.

Accepted Answer

Proper internal control requires clearly establishing and assigning responsibility for tasks to one person to ensure accountability and prevent errors or fraud.

Question 11

Once a good system of internal control is in place,it rarely needs review.

Accepted Answer

A good system of internal control should be reviewed regularly to ensure that it is still effective and relevant to the organization's operations. Changes in personnel, processes, and technology can all affect the efficacy of an internal control system, and periodic review and updates are necessary to ensure that it continues to mitigate risks appropriately.

Question 12

Internal control in technologically advanced accounting systems depends more on the design and operation of the information system and less on the analysis of its resulting documents.

Accepted Answer

With technologically advanced accounting systems, internal control is embedded within the information system itself rather than relying on the analysis of resulting documents. The design and operation of the system are critical for ensuring internal control.

Question 13

Technologically advanced accounting systems do not need monitoring for errors because computers always process transactions correctly.

Accepted Answer

Technologically advanced accounting systems can have programming errors or glitches that may lead to incorrect processing of transactions. Therefore, monitoring for errors is still necessary to ensure accuracy of financial information.

Question 14

Good internal control dictates that a person who controls an asset should also maintain the accounting records for that asset.

Accepted Answer

The answer of Good internal control dictates that a person...

Question 15

Cash includes currency,coins and the deposits in most checking accounts.

Accepted Answer

Cash is defined as physical currency and coins as well as money in bank accounts that can be accessed immediately, such as checking accounts.

Question 16

Cash equivalents are short-term highly liquid investment assets that are easily converted to cash and have maturities of one year.

Accepted Answer

Cash equivalents are short-term highly liquid investment assets that are easily converted to cash and have maturities of three months or less, not one year.

Question 17

Collusion is when a person embezzles money from a company and tries to hide the evidence.

Accepted Answer

Collusion does not necessarily involve the embezzlement of money. It refers to secret cooperation between two or more people to deceive or defraud others. Embezzlement is just one type of fraudulent activity that could involve collusion.

Question 18

Two important limitations of internal control systems are (1)human error or human fraud and (2)cost-benefit.

Accepted Answer

Human error or human fraud can still occur within an internal control system, and implementing strong controls can be costly and may not provide enough benefits to justify the expenses.

Question 19

A properly designed internal control system is a key part of accounting information systems design,analysis and performance.

Accepted Answer

A properly designed internal control system is essential for ensuring the accuracy and reliability of financial information. It also helps to prevent fraud and errors, and ensures compliance with legal and regulatory requirements. Therefore, it is an important aspect of accounting information systems design, analysis, and performance.

Question 20

Maintaining adequate business records is an important internal control principle.

Accepted Answer

Maintaining adequate business records helps to ensure accuracy and completeness of financial transactions, aids in making informed business decisions, and assists in compliance with legal and regulatory requirements. It is an important internal control principle as it helps to mitigate the risk of errors, fraud, and misstatements in financial reporting.

Quiz 6: Reporting and Analyzing Cash and Internal Controls