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| 1 | |
Workplace fraud involves the use of one's job for personal gain, through either intentional or unintentional misuse of the employer's assets. |
| | A) | True |
| | B) | False |
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| 2 | |
Asset misappropriation involves the theft or misuse of the employer's resources. |
| | A) | True |
| | B) | False |
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| 3 | |
Internal controls are the policies and procedures that the business has implemented to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. |
| | A) | True |
| | B) | False |
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| 4 | |
A person who has custody of an asset should maintain that asset's accounting records. |
| | A) | True |
| | B) | False |
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| 5 | |
The separation of duties deters theft. |
| | A) | True |
| | B) | False |
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| 6 | |
Employees handling large amounts of cash and easily transferable assets should be bonded. |
| | A) | True |
| | B) | False |
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| 7 | |
To improve efficiency of operations, the person who designs and programs the information system should be one who operates it. |
| | A) | True |
| | B) | False |
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| 8 | |
Firewalls are points of entry to a system that require passwords to continue. |
| | A) | True |
| | B) | False |
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| 9 | |
A properly designed and effective internal control system provides guarantees against losses and errors in accounting. |
| | A) | True |
| | B) | False |
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| 10 | |
The Sarbanes-Oxley Act requires the managers and auditors of public companies to document and certify the effectiveness of the system of internal control. |
| | A) | True |
| | B) | False |
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| 11 | |
The cost-benefit principle states that the costs of internal controls not exceed their benefits. |
| | A) | True |
| | B) | False |
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| 12 | |
The Sarbanes-Oxley Act requires the company to assess the effectiveness of its internal controls. |
| | A) | True |
| | B) | False |
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| 13 | |
One principle of good internal control includes applying technological controls. |
| | A) | True |
| | B) | False |
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| 14 | |
A Voucher system is one method to control the amount of supplies used each month within a department. |
| | A) | True |
| | B) | False |
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| 15 | |
One major type of workplace fraud is asset misappropriation. |
| | A) | True |
| | B) | False |
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| 16 | |
Which of the following are characteristics of all workforce fraud? |
| | A) | It is secret. |
| | B) | It violates the employee's duties to his or her employer. |
| | C) | It is done to provide direct or indirect benefit to the employee. |
| | D) | It costs the employer money. |
| | E) | All of the above |
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| 17 | |
Which of the following are categories of workplace fraud? |
| | A) | Asset misappropriation |
| | B) | Corruption |
| | C) | Fraudulent financial statements |
| | D) | Choices A and B above. |
| | E) | Choices A, B, and C above. |
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| 18 | |
Making sure assets are protected from various types of losses is a description of which of the following principles of internal control? |
| | A) | Responsibilities should be clearly established |
| | B) | Adequate records should be maintained |
| | C) | Assets should be insured and employees bonded |
| | D) | Record-keeping and custody should be combined |
| | E) | Mechanical devices should be used whenever practicable |
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| 19 | |
Which of the following is a purpose of an internal control system? |
| | A) | Protect assets |
| | B) | Ensure reliable accounting |
| | C) | Promote efficient operations |
| | D) | Urge adherence to company policies |
| | E) | All of the above |
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| 20 | |
Which of the following is not a principle of internal control? |
| | A) | Separate record keeping from custody of assets |
| | B) | Regular reviews by those involved directly in the company's activities |
| | C) | Divide responsibility for related transactions |
| | D) | Maintain adequate records |
| | E) | Technological controls should be applied |
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| 21 | |
If two sales clerks share the same cash register, which principle of internal control has been compromised (or violated)? |
| | A) | Establishing responsibilities |
| | B) | Separate recordkeeping from custody of assets |
| | C) | Maintain adequate records |
| | D) | All of the above |
| | E) | None of the above |
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| 22 | |
Which of the following would be a benefit of having employees bonded? |
| | A) | Bonding reduces the risk of loss. |
| | B) | Bonding discourages theft. |
| | C) | The bonding company is unlikely to be sympathetic with an employee involved in theft. |
| | D) | All of the above. |
| | E) | None of the above. |
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| 23 | |
At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares the cash count with the recorded cash sales for the day, and (3) makes notations of differences (that is, cash overages or shortages) on a special report that is forwarded, along with the cash, to the accounting department. How should this procedure be described? |
| | A) | It is an acceptable procedure, adhering to internal control principles. |
| | B) | The procedure is designed to provide adequate internal control over cash. |
| | C) | It is an unacceptable procedure, not following internal control principles. |
| | D) | The procedure follows the broad principle of internal control of insuring assets. |
| | E) | None of the above. |
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| 24 | |
Management's ability to monitor and control business operations is greatly improved with a fully automated accounting system because of which of the following? |
| | A) | Separation of duties does not have to be maintained. |
| | B) | More hard evidence in the form of written forms and documents are used. |
| | C) | Less testing of records is possible. |
| | D) | Data entry errors are always discovered in the early stages. |
| | E) | Technology allows quicker access to databases and information. |
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| 25 | |
Which of the following duties should be segregated when technology is used to provide quicker access to databases and information? |
| | A) | The person who designs and programs the information system must not be the one who operates it. |
| | B) | The person who has access to computer programs should not have access to files from the activities related to cash receipts. |
| | C) | The person who has access to computer programs should not have access to files from the activities related to cash disbursements. |
| | D) | Choices A and B above. |
| | E) | Choices A B, and C above. |
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| 26 | |
Which of the following is an example (are examples) of internal controls that could be put in place to help safeguard the risk of loss due to increased e-commerce transactions? |
| | A) | Firewalls |
| | B) | Encryption |
| | C) | Exploitation |
| | D) | A and B above |
| | E) | None of the above |
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| 27 | |
Which of the following statements about technologically advanced systems is (are) incorrect? |
| | A) | With computers, more hard-copy items of documentary evidence are available for review. |
| | B) | Technologically advanced systems can provide new evidence. |
| | C) | Technology can be designed to require the use of passwords or other identification before access to the system is granted. |
| | D) | All of the above choices are incorrect. |
| | E) | All of the above choices are correct. |
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| 28 | |
Which of the following statements about systems of internal control is incorrect? |
| | A) | All internal control policies and procedures have limitations which may arise from the human element. |
| | B) | The benefits of internal controls must not exceed their costs. |
| | C) | The human element creates several potential limitations of internal controls that can be categorized as either (1) human error or (2) human fraud. |
| | D) | Human error can occur from negligence, fatigue, misjudgment, or confusion. |
| | E) | Human fraud involves intent by people to defeat internal controls, such as management override, for personal gain. |
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| 29 | |
Which of the following statements about a voucher system is incorrect? |
| | A) | A voucher system is a set of procedures and approvals designed to control payments and the acceptance of obligations. |
| | B) | The voucher system of control establishes procedures for verifying, approving, and recording obligations for eventual cash payment. |
| | C) | The voucher system of control establishes procedures for issuing checks for payment of verified, approved, and recorded obligations. |
| | D) | Generally, a reliable voucher system follows standard procedures for every transaction; however, exceptions may be made when multiple purchases are made from the same supplier. |
| | E) | All of the above statements are correct. |
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| 30 | |
Which of the following is not required by the Sarbanes-Oxley Act? |
| | A) | An internal control report must be included in each annual report. |
| | B) | The company's external auditor must test the company's internal control system with respect to financial reporting. |
| | C) | Each company's chief financial officer (CFO) and Controller must certify that the financial statements fairly present the operations and financial condition of the company. |
| | D) | Publicly traded companies must establish procedures for the confidential, anonymous submission by employees of complaints regarding the company's accounting or internal controls. |
| | E) | None of the above are required by the Sarbanes-Oxley Act. |
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