Essay Questions
88. Indicate whether each of the following statements regarding internal controls is true or false.
_____ a) Internal controls are used to provide absolute assurance that the objectives of an enterprise will be accomplished.
_____ b) Internal controls can be divided into accounting controls and administrative controls.
_____ c) The mechanics of internal control systems varies from company to company.
_____ d) Accounting controls are concerned with the evaluation of performance and the assessment of the degree of compliance with company policies and public laws.
_____ e) Administrative controls are composed of policies and procedures that are designed to safeguard the assets and to assure that accounting records contain reliable information.
89. Indicate whether each of the following statements regarding internal controls is true or false.
_____ a) Separation of duties is an internal control feature that requires different individuals to perform the following functions: authorization, recording, and custody of assets.
_____ b) Under proper internal controls, the person who collects customer payments should also maintain the records of cash receipts.
_____ c) Under proper internal controls, those who are given authority should not bear the corresponding responsibility.
_____ d) One of the basic rules of internal control is to require some employees to take regular vacations.
_____ e) A fidelity bond is a form of insurance that companies buy to protect themselves from loss due to employee dishonesty.