Question 1

Which of the following best describes the 'fraud triangle' in the context of financial accounting?

Accepted Answer

It consists of motive, opportunity, and rationalization.

Question 2

A company discovers that an employee has been overstating expense reimbursements. According to the study materials, this is an example of:

Accepted Answer

Misappropriation of assets

Question 3

Which of the following is NOT one of the five objectives of internal control?

Accepted Answer

Increase company profits

Question 4

Which internal control procedure is best illustrated by requiring two different employees to handle asset custody and record keeping?

Accepted Answer

Separation of duties

Question 5

A company’s bank reconciliation shows a deposit in transit of $$2,000 and outstanding checks of 1$$,200. If the bank statement balance is $$10,000, what is the adjusted bank balance?

$$	ext{Adjusted Bank Balance} = 	ext{Bank Statement Balance} + 	ext{Deposits in Transit} - 	ext{Outstanding Checks}$

Accepted Answer

$$10,800$$

Question 6

Which of the following is a limitation of internal control systems?

Accepted Answer

Collusion among employees

Question 7

Which of the following is considered a cash equivalent on the balance sheet?

Accepted Answer

A certificate of deposit with a maturity of two months

Question 8

A company receives a bank statement showing a service charge of $$25 and interest revenue of 10. $$What is the net adjustment to the book balance?

$$	ext{Net Adjustment} = 	ext{Interest Revenue} - 	ext{Service Charge}$$

Accepted Answer

$$-15$$

Question 9

Which of the following is an example of a control procedure for cash receipts over the counter?

Accepted Answer

Using point-of-sale terminals to record sales and inventory changes

Question 10

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To explain differences between the company’s cash records and the bank statement

Question 11

Which of the following is NOT a component of an internal control system?

Accepted Answer

Financial leverage

Question 12

A company’s petty cash fund is established at $$300. At the end of the month, the custodian has 40 in $$cash and $260 in petty cash vouchers. What should be the journal entry to replenish the fund?

Accepted Answer

Debit Petty Cash Expenses $$260; Credit Cash 260$$

Question 13

Which of the following is a security measure used to protect customer data in e-commerce?

Accepted Answer

Encryption

Question 14

Which of the following is an example of a machine learning application in accounting?

Accepted Answer

Detecting unusual employee expense reimbursement claims

Question 15

Which of the following is NOT a type of expense reimbursement fraud classified by the ACFE?

Accepted Answer

Unrecorded revenue

Question 16

A company’s bank reconciliation includes the following items: deposit in transit $$1,500, outstanding checks 800$$, bank service charge $$20, and interest revenue 10. If $$the bank statement balance is $$5,000, what is the adjusted bank balance?

$$	ext{Adjusted Bank Balance} = 	ext{Bank Statement Balance} + 	ext{Deposits in Transit} - 	ext{Outstanding Checks}$

Accepted Answer

$$5,700$$

Question 17

Which of the following is a reason why machine learning is effective for fraud detection in accounting?

Accepted Answer

It can examine every transaction and combine structured and unstructured data.

Question 18

Which of the following is a real-world example of a control procedure for cash payments?

Accepted Answer

Splitting duties among purchasing, receiving, and payment approval

Question 19

Which of the following is a common way to circumvent internal controls?

Accepted Answer

Management override

Question 20

Which of the following is a correct formula for adjusting the book balance during a bank reconciliation?

$$	ext{Adjusted Book Balance} = 	ext{Book Balance} + 	ext{Bank Collections} + 	ext{Interest Revenue} + 	ext{EFT Receipts} - 	ext{Service Charges} - 	ext{NSF Checks} - 	ext{EFT Payments} \pm 	ext{Book Errors}$$

Accepted Answer

The formula above is correct.

Internal Control and Cash: Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards