31) Which statement about internal controls is FALSE?
A) Public companies must issue a report on internal control with their financial statements.
B) Outside auditors much evaluate and report on the soundness of a company's internal controls.
C) The Sarbanes-Oxley Act requires public companies to issue a report on internal control.
D) Public companies do not have to evaluate the effectiveness of internal controls.
32) The components of internal control do NOT include:
A) control environment.
B) risk assessment.
C) control procedures.
D) safeguard assets.
33) The control environment does NOT include:
A) a corporation's code of ethics.
B) prohibition of bribes and kickbacks.
C) risk assessment.
D) avoidance of transactions that involve a conflict of interest.
34) Examples of internal control procedures do NOT include:
A) proper segregation of duties.
B) adequate records.
C) proper approvals.
D) risk assessment.
35) Which statement is FALSE?
A) The bookkeeper should not handle incoming checks from customers.
B) Cashiers should not have access to the accounting records.
C) The treasurer's department should be in charge of handling customers' incoming checks, signing checks and approving payments.
D) The accounting department should be in charge of record keeping and depositing customers' checks.
36) Which statement is FALSE?
A) Sales to customers should be approved by a separate credit department.
B) Purchases on credit should be approved by a separate purchasing department.
C) Transactions with a large dollar amount should be approved by the Board of Directors or top management.
D) The firing of employees should be handled by the department where the employee works.
37) Which of the following is NOT a way to circumvent a strong system of internal control?
A) management override
B) collusion
C) mandatory vacations
D) employee negligence
38) For each of the following situations, indicate which internal control procedure Johnson Company has violated:
1.Since they are costly, background checks are not done for the employees.
2.Purchases of items on credit do not need the approval of the purchasing department.
3.All hard copies of documents are shredded after one month and electronic records are deleted after two months.
4.The company does not prepare operating or cash budgets.
5.The accountant receives the checks from customers in payment of amounts due and records the cash receipts.
6.There are no locks in the area where inventory is stored.
7.The hiring, firing and pay adjustments are made by the foremen in the manufacturing area.