Chapter 7 Quiz Question 1 The most important element of the fraud triangle is rationalization. Question 2 Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency. Question 3 Under an effective system of internal control, errors occur only as a result of fraud or dishonesty. Question 4 Control over cash disbursements is improved if major expenditures are paid by check. Question 5 Cash equivalents are highly liquid investments that can be converted into a specific amount of cash. Question 6 Which of the following is not one of the main factors that contribute to fraudulent activity? Question 7 Under the concept of establishment of responsibility, how many people should have the ultimate responsibility? Question 8 A consequence of separation of duties is that Question 9 In large companies, the independent internal verification procedure is often assigned to Question 10 Sam’s Grocery Store has the following policy. “�Only one cashier can have access to a cash drawer.’ Which internal control principle supports this policy? Question 11 Supervisors counting cash receipts daily is an example of Question 12 Blank checks Question 13 All of the following are true regarding bank statements except Question 14 Which of the following would be added to the balance per bank on a bank reconciliation? Question 15 Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: Question 16 Clark Company developed the following reconciling information in preparing its September bank reconciliation: Cash balance per bank, 9/30 � � � � � � $30,800 Note receivable collected by bank � � � � 16,800 Outstanding checks � � � � � � � � � 25,200 Deposits in transit � � � � � � � � � 12,600 Bank service charge � � � � � � � � � � 210 NSF check � � � � � � � � � � � 3,360 Using the above information, determine the cash balance per books (before adjustments) for the Clark Company. Question 17 Of the following employees, who should prepare the bank reconciliation? Question 18 In the month of May, Lopat Company Inc. wrote checks in the amount of $55,500. In June, checks in the amount of $75,948 were written. In May, $50,808 of these checks were presented to the bank for payment, and $65,298 in June. What is the amount of outstanding checks at the end of May? Question 19 All of the following are true regarding the management and monitoring of cash except Question 20 Match the items below by entering the appropriate code letter in the space provided.
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