Multiple Choice Questions
1. The principles of internal control include:
A) Establish responsibilities.
B) Maintain minimal records.
C) Use only computerized systems.
D) Bond all employees.
E) Require automated sales systems.
2. Principles of internal control include:
A) Apply technological controls.
B) Divide responsibilities for related transactions.
C) Perform regular and independent reviews.
D) Separate recordkeeping from custody of assets.
E) All of the above.
3. A good system of internal control:
A) Urges adherence to prescribed managerial policies.
B) Insures profitable operations.
C) Eliminates the need for an audit.
D) Requires the use of non-computerized systems.
E) Is not necessary if the company uses a computerized system.
4. A company's internal control system:
A) Eliminates the risk of loss.
B) Monitors and controls business activities.
C) Eliminates human error.
D) Eliminates the need for audits.
E) All of the above.
5. When two clerks share the same cash register it is a violation of which internal control principle?
A) Establish responsibilities.
B) Maintain adequate records.
C) Insure assets.
D) Bond key employees.
E) Apply technological controls.
6. The most serious limitation of internal control is
A) Computer error.
B) Human fraud or human error.
C) Cost-benefit principle.
D) Cybercrime.
E) Management fraud.
7. Cash equivalents:
A) Include savings accounts.
B) Include checking accounts.
C) Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes.
D) Include time deposits.
E) Have no immediate value.
8. The number of days' sales uncollected:
A) Is used to evaluate the liquidity of receivables.
B) Is calculated by dividing accounts receivable by sales.
C) Measures a company's ability to pay its bills on time.
D) Measures a company's debt to income.
E) Is calculated by dividing sales by accounts receivable.
9. The days' sales uncollected ratio is used to:
A) Measure how many days of sales remain until the end of the year.
B) Determine the number of days that have passed without collecting on accounts receivable.
C) Identify the likelihood of collecting sales on account.
D) Estimate how much time is likely to pass before the amount of accounts receivable is received in cash.
E) Measure the amount of layaway sales for a period.
10. A set of procedures and approvals that is designed to control cash disbursements and the acceptance of obligations is referred to as a(n):
A) Internal cash system.
B) Petty cash system.
C) Cash disbursement system.
D) Voucher system.
E) Cash control system.