Learning Objective 4-8
1) Cash is an asset that must be safeguarded because ________.
A) cash is easy to conceal
B) ownership is difficult to prove
C) cash can be a significant risk to business
D) All of these are correct.
2) Sam doesn’t bother to record checks in his checkbook. He just goes to an ATM and asks for a "Balance Inquiry." Then he knows if he has enough money to pay his bills. This is an internal control ________.
A) strength
B) weakness
C) law
D) regulation
3) Books, Inc. always balances its checkbook before it pays the month’s bills. This is an internal control ________.
A) strength
B) weakness
C) law
D) regulation
4) The bookkeeper opens the mail, deposits any checks received in the bank, and updates the company’s accounts receivable. This is an internal control ________.
A) strength
B) weakness
C) regulation
D) suggestion
5) The Ace Electronics has weekly staff meetings to discuss customer complaints. This is an internal control ________.
A) strength
B) weakness
C) regulation
D) law
6) The daily bank deposit is made by whoever is going to lunch near the bank. This is an internal control ________.
A) strength
B) weakness
C) law
D) regulation
7) The company has a policy of waiting at least a month before calling the bank about errors on the bank statement. This saves time because most errors correct themselves. This is an internal control ________.
A) strength
B) weakness
C) law
D) regulation
8) Segregation of duties means that ________.
A) the person who has the physical custody of cash is the same person who does the record-keeping for cash
B) the person who makes the daily bank deposit should be the same person who does the record keeping for cash
C) the cashier should not have the key to the records tape inside the cash register
D) access to the computerized accounting system should be controlled by passwords that are changed regularly
9) Employees who sign checks should not record cash payments in the accounting records.
10) An effective system of internal controls includes clear assignment of responsibility, specific procedures for documentation related to assets, and independent internal verification of data.
11) Requiring cashiers to handle cash and count the cash at the end of each shift is an internal control weakness because these duties should be segregated.