Accounting Quiz

Which of the following statements concerning internal controls is true?

            A strong internal control system provides reasonable assurance that the objectives of a company will be accomplished.

            Internal accounting controls are limited to the policies and procedures used to protect the company from embezzlement.

            Internal administrative controls are designed to limit the amount of funds spent on investments.

            The control procedure, separation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company.

 

Hyperion Company has established internal control policies and procedures in order to achieve the following objectives:

 

(1) Safeguard the company’s assets

(2) Assure that the accounting records contain reliable information

(3) Evaluate management performance effectively

(4) Assure that employees comply with company policies

 

Which of these objectives are primarily achieved by accounting controls?

            Objectives 1 and 2

            Objectives 2 and 3

            Objectives 1 and 4

            Objectives 3 and 4

 

The following are features of an internal control system except for:

             Establishing proper procedures for processing transactions

             Mandatory retirement at the age of 65

             Bonding employees to recover losses through insurance

             Hiring and training competent employees

 

Accounting controls are designed to:

            Safeguard company assets and ensure reliable accounting records

            Evaluate performance for annual merit increases

            Ensure low employee turnover

            Eliminate collusion

 

The most negative opinion that an auditor can express is the:

             Disclaimer

             Adverse opinion

             Qualified opinion

             Unqualified opinion

 

Krieger Company’s bank statement included an NSF check written by one of its customers. What effect will the entry to recognize the NSF check have on the company’s financial statements?

   

             Choice A

             Choice B

             Choice C

             Choice D

 

At the end of the month, Grant Entertainment Company showed a $9,300 book balance in its cash account. The following information was gathered by studying the bank statement and the company’s cash records:

 

(1) Deposits in transit amounted to $3,150

(2) Outstanding checks were $6,200

(3) A $550 check had been incorrectly drawn on Grant’s account by the bank

(4) NSF checks returned by the bank were $750

(5) Bank service charge was $29

(6) Credit memo for $75 for the collection of one of the company’s account receivable

 

Based on the above information the true cash balance would be:

             $8,596.

             $6,096.

             $9,146.

             $6,250.