Learning Objective 2-6
1) Internal controls are ________.
A) laws and regulations imposed by the IRS and SEC to ensure the accuracy of financial statements
B) accounting procedures required by the FASB to ensure the accuracy and reliability of firms’ accounting records
C) policies and procedures the managers of a firm use to protect a firm’s assets and the accuracy of its accounting records
D) rules required by creditors to ensure repayment of liabilities
2) Preventive controls include ________.
A) having the company’s accountant review the accounting records and make corrections each month
B) limiting access to assets
C) bank reconciliations (comparing the company’s accounting records for cash to its bank statement)
D) counting the money in the cash register and comparing it with the total sales entered in the register
3) Detective controls include ________.
A) separating the duties of cash collection from the duties of recording cash transactions in the books
B) bank reconciliations (comparing the company’s accounting records for cash to its bank statement)
C) limiting access to assets
D) requiring passwords to access the computerized accounting records
4) Corrective controls include ________.
A) requiring authorization for certain transactions
B) limiting access to assets
C) requiring passwords to access the computerized accounting records
D) procedures for handling any errors that are detected
5) Preventive controls are ________.
A) designed to monitor business risks
B) designed to identify when an error or irregularity has occurred
C) designed to stop a problem before it starts
D) directed at recovering from an error
6) Detective controls are ________.
A) designed to monitor business risks
B) designed to identify when an error or irregularity has occurred
C) designed to stop a problem before it starts
D) directed at recovering from an error
7) Corrective controls are ________.
A) designed to monitor business risks
B) designed to identify when an error or irregularity has occurred
C) designed to stop a problem before it starts
D) directed at recovering from an error
8) Denying future credit to customers who are slow to pay their accounts is called a ________.
A) business control
B) detective control
C) corrective control
D) preventative control
9) An accountant discovered a bank error while reviewing the bank statement, and called the bank to correct the mistake. This call is an example of a ________.
A) business control
B) detective control
C) corrective control
D) preventive control
10) The accountant called the bank after noticing that a $200 deposit made on July 21 did not appear on the July 31 bank statement. This call is an example of a ________.
A) business control
B) detective control
C) corrective control
D) preventive control