11) The Sarbanes-Oxley Act of 2002:
A) requires public companies to issue an internal control report.
B) requires an outside auditor to evaluate the soundness of a public company's internal controls.
C) requires public companies to issue a special report on the amount of collusion within a company.
D) A and B
12) A system of handling cash receipts by mail whereby customers send checks in payment of their accounts directly to a post office box controlled by a bank is a(n):
A) imprest system.
B) lock-box system.
C) phishing system.
D) online banking system.
13) The primary way that fraud is prevented and detected is through a proper system of:
A) ethical standards and a code of ethics.
B) policies developed by upper management.
C) internal control.
D) internal and external audits.
14) Internal control is a plan of organization and system of procedures implemented by company ________ and the ________ designed to accomplish five objectives.
A) internal auditors, employees
B) external auditors, management
C) management, board of directors
D) employees, board of directors
15) Internal controls are designed to accomplish five objectives that include compliance with legal requirements, promote operational efficiency, safeguard assets, encourage employees to follow company policy and:
A) prevent misappropriation of assets.
B) prevent collusion.
C) prevent fraud.
D) ensure accurate, reliable accounting records.
16) The Public Company Oversight Board was created to oversee the:
A) SEC.
B) management of public companies.
C) audits of public companies.
D) American Institute of Certified Public Accountants.
17) A fidelity bond is a(n):
A) employment contract for a specified period of time.
B) insurance policy that reimburses a company for employee theft.
C) contract prohibiting former employees from working for a competitor.
D) promise by a company to safeguard customers' personal information.
18) The "tone at the top" refers to:
A) a component of the control environment.
B) attitudes and behaviors directed towards people of different heritage.
C) owners and top managers behaving honorably to set a good example for employees.
D) A and C.
19) Smart hiring practices include:
A) background checks.
B) clear job descriptions.
C) proper training and supervision.
D) all of the above.
20) Three key duties must always be separated under a good system of internal controls:
A) asset handling, record keeping and transaction approval.
B) asset handling, hiring and safeguarding of assets.
C) asset handling, recordkeeping and safeguarding of assets.
D) record keeping, transaction analysis and transaction approval.