Internal Controls and Bank Reconciliation Principles in Accounting

Controls that relate to the safeguarding of assets and enhance the accuracy and reliability of the accounting records are

physical controls.

Which of the following principles of internal control activities is relevant when a company uses a computerized (rather than manual) accounting system?

All of these principles of internal control activities are relevant to a computerized and a manual accounting system.

Controls that relate primarily to the safeguarding of assets are

physical controls.

Having different individuals receive cash, record cash receipts, and hold the cash is an example of

segregation of duties.

Counting of daily cash receipts by a supervisor is an application of which internal control principle?

Independent internal verification

An internal auditor reconciling the bank statement monthly is an example of

independent internal verification.

The most important element of the fraud triangle is

opportunity.

Internal controls are not designed to safeguard assets from

natural disasters.

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

increases the potential for errors and fraud.

The custodian of a company asset should

not have access to the accounting records for that asset.

Internal auditors

evaluate the system of internal controls for the companies that employ them.

When two or more people get together for the purpose of circumventing prescribed controls, it is called

collusion.

From an internal control standpoint, the asset most susceptible to improper diversion and use is

cash.

Two individuals at a retail store work the same cash register. You evaluate this situation as

a violation of establishment of responsibility.

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of

segregation of duties is violated.

Bonding personnel who handle cash and conducting background checks is part of

human resource controls.

Related purchasing activities include

ordering, receiving, paying.

Maximum benefit from independent internal verification is obtained when

discrepancies are reported to management.

If employees are bonded

they have been insured against misappropriation of assets.

A system of internal control

can be rendered ineffective by employee collusion.

Computer facilities with pass key access or fingerprint scans are

physical controls.

Reconciling the bank statement monthly is an example of

independent internal verification.

The use of remittance advices for mail receipts is an example of

documentation procedures.

The use of pre-numbered checks in disbursing cash is an application of the principle of

documentation procedures.

Printing check amounts by machine in indelible ink is an example of

physical controls.

Checks received through the mail should

immediately be endorsed "For Deposit Only."

Proper control for over-the-counter cash receipts includes

a cash register with totals visible to the customer.

A company stamps checks received in the mail with the words "For Deposit Only." This endorsement is called a(n)

restrictive endorsement.

Control over cash disbursements is generally more effective when

payments are made by check.

An application of good internal control over cash disbursements is

following payment, the approved invoice should be stamped PAID.

Blank checks

should be safeguarded.

A voucher system is a series of prescribed control procedures

designed to assure that disbursements by check are proper.

Under a voucher system, a prenumbered voucher is prepared for every

expenditure except those made from petty cash.

A petty cash fund is generally established in order to

pay relatively small expenditures.

A petty cash fund should be replenished

at the end of every accounting period.

The size of the petty cash fund is dependent on

anticipated disbursements for a three- to four-week period.

The party who issues a check is the

maker.

A disbursement system that uses wire, telephone, or computers to transfer cash balances from one location to another is called a(n)

electronic funds transfer system.

When opening a bank checking account, a signature card

indicates each person authorized to sign checks on the account.

A bank statement

shows the activity which increased or decreased the depositor's bank account balance.

A remittance advice attached to a company check provides

the explanation of the purpose of the check.

A check returned by the bank marked "NSF" means

not sufficient funds.

A bank reconciliation should be prepared

to explain any difference between the depositor's balance per books and the balance per bank.