Cash and Internal Controls Quiz

Which of the following is NOT a purpose of internal control?

• Protect assets

• Ensure reliable accounting

• Maximize shareholder wealth

• Promote efficient operations

The Sarbanes-Oxley Act requires that auditors must:

• Ignore internal control systems

• Evaluate and report on internal controls

• Only audit small companies

• Work without oversight

Which of the following is a principle of internal control?

• Reduce the number of employees

• Combine recordkeeping and asset custody

• Establish responsibilities

• Eliminate technological controls

What is one limitation of internal control systems?

• They prevent all types of fraud

• They guarantee profitability

• Human error

• They require no cost

Technology impacts internal controls by:

• Reducing evidence of processing

• Eliminating errors

• Stopping fraud completely

• Replacing all employees

Which is a correct cash control guideline?

• Cash disbursements should be made in cash only

• Handling and recordkeeping should be done by the same person

• Receipts should be deposited promptly

• Checks should never be used

Cash equivalents include:

• Inventory

• Long-term bonds

• Short-term, highly liquid investments

• Receivables

Which is NOT a principle of cash management?

• Encourage collection of receivables

• Delay payment of liabilities

• Keep excess cash idle

• Plan expenditures

Over-the-counter cash receipt control includes:

• Two people open mail

• Cash register record comparison

• Petty cash disbursement

• Bank reconciliation

Cash Over and Short account is used when:

• A bank error occurs

• Petty cash is overdrawn

• There's a difference in register cash

• No cash is handled