Acct Ch 8 Review

What is the primary purpose of internal control as defined in the principles of internal control activities?

• To prevent and detect fraud

• To increase the efficiency of operations

• To ensure financial statements are reliable

• To comply with government regulations

According to the Sarbanes-Oxley Act, who is primarily responsible for preventing and detecting fraud within a company?

• The CEO and CFO

• The shareholders

• The customers

• The external auditors

Which of the following is NOT a control feature of a bank account?

• Making bank deposits

• Writing checks

• Electronic banking

• Issuing stock certificates

What is the function of a petty cash fund in terms of internal control?

• To manage large cash transactions

• To handle minor expenditures

• To invest excess cash

• To record sales transactions

What is the primary purpose of internal control procedures in a company according to the feature story described in the text?

• To increase employee benefits

• To discourage employees from fraudulent activities

• To simplify financial reporting

• To enhance business partnerships

Which of the following is NOT an example of fraud as mentioned in the text?

• A bookkeeper diverting funds from bill payments to a personal account

• A shipping clerk shipping merchandise to himself

• A CEO investing company funds into new technology

• A computer operator embezzling money from a bank

According to the text, what is a common outcome of fraud in a business environment?

• Increased stock prices

• Personal benefit to the employee at the employer's cost

• Improved internal controls

• Expansion of business operations

Refer to the fraud triangle illustrated. What does the fraud triangle explain?

• The geometric distribution of financial assets

• The factors that contribute to fraudulent activity

• The structure of a company’s finance department

• The annual growth rate of internal fraud cases

What is a common reason employees commit fraud, as mentioned in the text?

• Lack of job satisfaction

• Personal financial problems

• Peer pressure

• Desire for public recognition

According to the text, what is a key function of internal control systems?

• To manage employee benefits

• To safeguard assets and enhance the reliability of accounting records

• To promote new business strategies

• To reduce employee turnover