Chapter 5: Fraud, Internal Control, and Cash

True/False Questions

[QUESTION]
1. Employee fraud is often grouped into three categories, including corruption, asset
misappropriation, and embezzlement.

Answer: False
Feedback: Employee fraud is often grouped into three categories, including corruption, asset
misappropriation, and financial statement fraud. Embezzlement (or theft) is considered to be
asset misappropriation.

[QUESTION]
2. The fraud triangle identifies incentive, opportunity, and benchmarks as the requirements
for a fraud to occur.

Answer: False
Feedback: The elements of the fraud triangle are the factors necessary for fraud to occur:
incentive, opportunity, and rationalization.

[QUESTION]
3. The Sarbanes-Oxley Act (SOX) requires external auditors to test the company’s internal
control system.

Answer: True
Feedback: SOX requires external auditors to test the effectiveness of the company’s internal
controls and issue a report.

[QUESTION]
4. Internal control consists of the actions taken by people at every level of an organization to
achieve its objectives relating to operations, reporting, and compliance.

Answer: True
Feedback: Internal control consists of the actions taken by people at every level of an
organization to achieve its objectives relating to operations, reporting, and compliance.

[QUESTION]
5. The incentive element of the fraud triangle includes reasons why top management may
commit fraud such as enhancing job security and obtaining bigger paychecks.

Answer: True

Feedback: These are possible incentives for committing accounting fraud.

[QUESTION]
6. The Sarbanes-Oxley Act (SOX) grants legal protection to ‘whistle-blowers.’
Answer: True
Feedback: SOX does provide that a ‘whistle-blower’ cannot be fired and grants legal
protection so they are not retaliated against by those charged with fraud.

[QUESTION]
7. Internal controls include the policies and procedures a company implements to promote
efficient and effective operations, protect assets, enhance accounting information, and adhere
to laws and regulations.

Answer: True
Feedback: Internal control consists of the actions taken to promote efficient and effective
operations, protect assets, enhance accounting information, and adhere to laws and
regulations.

[QUESTION]
8. The components of an internal control system include control environment, risk
assessment, control activities, information and communication, and rationalization.

Answer: False
Feedback: The components of an internal control system include control environment, risk
assessment, control activities, information and communication, and monitoring activities.
Rationalization is one of the three elements of the fraud triangle.

[QUESTION]
9. A highly effective internal control should not be implemented if the cost is greater than the
benefit.

Answer: True
Feedback: Cost-benefit analysis is employed by an organization to determine whether
internal control procedures should be implemented.

[QUESTION]
10. The use of internal controls guarantees protection against losses due to fraud, errors, and
inefficiencies.

Answer: False
Feedback: An adequate internal control system does not guarantee that losses will not occur.

[QUESTION]
11. When duties are properly segregated, the accounting department should compare the cash
in the register with the cash count sheet.

Answer: True
Feedback: Segregation of duties relating to cash receipts ensures that those who handle the
cash (cashiers and supervisors) do not have access to those who record it (the accounting
staff). As such, the supervisor should compare the cash in the register with the cash count
sheet.

[QUESTION]
12. A good voucher system includes procedures and approvals designed to control cash
payments.

Answer: True
Feedback: The voucher system is part of the internal control system to provide control over
cash disbursement (payment) transactions.

13. A petty cash fund is a separate checking account used to reimburse employees for
expenditures they have made on behalf of the organization.

Answer: False
Feedback: A petty cash fund is a system used to reimburse employees for expenditures they
have made on behalf of the organization. The company removes cash from its general bank
account to hold at its premises in a locked cash box. The petty cash fund is comprised of the
contents of that locked box.

[QUESTION]
14. On a bank statement, deposits are listed as debits and cleared checks are listed as credits.

Answer: False
Feedback: From the bank’s point of view, deposits are liabilities and are recorded as credits,
and cleared checks are listed as debits because they reduce the bank’s liability to the
depositor.

[QUESTION]
15. Cash equivalents are short-term, highly liquid investments purchased within one year of
maturity.

Answer: False
Feedback: Cash equivalents are highly liquid investments purchased within three months of
maturity.

[QUESTION]
16. The entry recorded when the petty cash fund is replenished includes a debit to Petty Cash
and a credit to Cash.

Answer: False
Feedback: The entry recorded when the petty cash fund is established includes a debit to
Petty Cash and a credit to Cash. The entry recorded when the petty cash fund is replenished
includes a debit (or debits) to the asset or expense account(s) relating to the items that were
paid from the petty cash fund (i.e., Supplies, Travel Expense, Office Expense, etc.) and a
credit to Cash.

[QUESTION]
17. Cash that is legally or contractually required to be set aside for a specific purpose cannot
be reported with Cash and Cash Equivalents on the balance sheet.

Answer: True
Feedback: Companies are sometimes legally or contractually required to set aside cash for a
specific purpose and are not allowed to use it for day-to-day operations. This restricted cash
must be reported separately on the balance sheet.
Multiple Choice Questions

[QUESTION]
18. The Grass is Greener Company borrows money from a bank. Part of the loan agreement
requires Grass is Greener to maintain stockholders' equity of at least 40% of assets or
otherwise to pay a higher interest rate. This requirement is referred to as a:
A) loan covenant.
B) credit rating.
C) bond rating.
D) call feature.

Answer: A
Feedback: Many lending agreements include loan covenants, which require the company to
achieve financial targets, such as maintaining specific levels of assets or stockholders’ equity.
Loan covenants are terms of a loan agreement that if broken, entitle the lender to renegotiate
loan terms or force repayment.

[QUESTION]
19. Employee fraud includes all of the following categories except:
A) asset misappropriation.
B) corruption.
C) deception.
D) financial statement fraud.

Answer: C
Feedback: A fraud is an attempt to deceive others for personal gain. Employee fraud is often
grouped into three categories: corruption, asset misappropriation, and financial statement
fraud.

20. From the creditor’s perspective, what is the purpose of loan covenants?
A) To assist government agencies in examining financial statements
B) To help to ensure a company will be able to repay the loan
C) To aid in forecasting future revenues and expenses
D) To help to determine the amount of money lent to a company

Answer: B
Feedback: Loan covenants are terms of the loan agreement that, if broken, entitle the lender
to renegotiate the loan terms or force repayment. Many lending agreements include loan
covenants, which require the company to achieve financial targets, such as maintaining
specific levels of assets or stockholders’ equity.

[QUESTION]
21. Research has found that three factors exist when fraud occurs. Which of the following is
not one of the three factors of the fraud triangle?
A) Incentive to commit fraud
B) Opportunity to commit fraud
C) Ability to rationalize the fraud
D) Lack of a code of ethics
Answer: D
Feedback: The three factors in the fraud triangle include incentive, opportunity, and
rationalization.

[QUESTION]
22. The fraud triangle contains three elements that must exist for accounting fraud to occur.
The elements are:
A) fear, greed, and satisfaction.
B) greed, larceny, and access.
C) motive, opportunity, and means.
D) incentive, opportunity, and rationalization.

Answer: D
Feedback: For accounting fraud to occur, there must first be an incentive for someone to
commit the fraud. Second, the opportunity to commit the fraud must exist. Lastly, fraudsters
rationalize their actions through a feeling of personal entitlement, which outweighs moral
principles, such as honesty and concern for others.

[QUESTION]
23. Which of the following would overstate a company's net income?
A) Counting shipments of customers' orders as revenue before payment has been received.
B) Shipping goods to customers without receiving orders from those customers, and
recording the transactions as revenue.
C) Accruing liabilities for marketing expenses before they are incurred.
D) Making an accrual adjusting entry for interest earned on a bond investment.

Answer: B
Feedback: Managers at Bausch & Lomb shipped as much as two years’ worth of contact
lenses to opticians who hadn’t even ordered them. These shipments were counted as sales
revenue, which overstated net income. Reporting revenue before cash is received and
accruing interest earned would increase net income and is in accordance with GAAP.
Accruing liabilities before they are incurred would decrease net income and is not in
accordance with GAAP.

[QUESTION]
24. Fraud is best defined as:
A) personal gain.
B) misrepresenting oneself as another.
C) deceitful actions of SOX.
D) financial statement errors.

Answer: A
Feedback: A fraud is generally defined as an attempt to deceive others for personal gain.

[QUESTION]
25. Which of the following is not a category of employee fraud?
A) Corruption
B) Asset misappropriation
C) Financial statement fraud
C) Internal controls

Answer: D
Feedback: Employee fraud is often grouped into three categories: corruption, asset
misappropriation, and financial statement fraud.

[QUESTION]
26. Which element is not part of the fraud triangle?
A) Sustainability
B) Incentive
C) Rationalization
D) Opportunity

Answer: A
Feedback: The fraud triangle includes incentive, opportunity, and rationalization.

[QUESTION]
27. A weak system of internal ______ provides the ______ to commit fraud.
A) controls; opportunity
B) audits; rationalization
C) financial statements; opportunity
D) loan covenants; incentive

Answer: A
Feedback: Internal controls systems help ensure that information is properly recorded and
reported. A weak system of internal controls provides an opportunity to commit fraud.

[QUESTION]
28. Which of the following was passed by Congress in response to financial statement frauds
that occurred in the early 2000s?
A) Federal Accounting Standards Board Act
B) Securities and Exchange Act
C) Sarbanes-Oxley Act
D) Clayton Act

Answer: C
Feedback: The Sarbanes-Oxley Act is a set of regulations passed by Congress in 2002 which
attempts to improve financial reporting.

[QUESTION]
29. Which of the following is a set of regulations passed by Congress in 2002 in an attempt to
improve financial reporting and restore investor confidence?
A) Enron Act
B) Federal Accounting Standards Board Act
C) Sarbanes-Oxley Act
D) Securities and Exchange Act

Answer: C
Feedback: The Sarbanes-Oxley Act is a set of regulations passed by Congress in 2002 in an
attempt to improve financial reporting and restore investor confidence.
[QUESTION]
30. Why was the Sarbanes-Oxley Act (SOX) enacted?
A) To bring GAAP closer to global financial reporting standards
B) The lack of significant corporate frauds during the late 1990s and early 2000s warranted
less monitoring for external stakeholders
C) To improve the financial reporting and restore investor confidence
D) Accounting rules had become so complex that investors could no longer understand them

Answer: C
Feedback: SOX was created in response to financial statement frauds that occurred in the
early 2000s. Confidence in the stock markets had been shaken by frauds involving Enron and
WorldCom, so the U.S. Congress passed the act in an attempt to improve financial reporting
and restore investor confidence.

[QUESTION]
31. Companies that must comply with the requirements of the Sarbanes-Oxley Act (SOX)
include all:
A) U.S. companies.
B) companies that trade on U.S. stock exchanges.
C) U.S. companies that trade on U.S. stock exchanges.
D) foreign companies that trade on U.S. stock exchanges.

Answer: B
Feedback: All companies that trade on U.S. stock exchanges must comply with requirements
of SOX.

[QUESTION]
32. All of the following are requirements of the Sarbanes-Oxley Act (SOX) except:
A) tip lines that allow employees to secretly submit concerns about questionable accounting
or auditing practices
B) fines of up to $5 million plus repayment of any fraud proceeds
C) evaluation and reporting on the effectiveness of internal control over financial reporting
for large public companies by external auditors
D) evaluation and reporting on the effectiveness of internal control over financial reporting
for all public companies by management with disclosure that management is not responsible
for the internal control system

Answer: D
Feedback: SOX requires management of all public companies to report on effectiveness of
internal controls over financial reporting, which establishes their primary responsibility for
the internal control system.

[QUESTION]
33. Considering current laws that deal with misstatements of financial results, which of the
following statements is correct?
A) Managers found guilty can escape paying fines if they declare bankruptcy.
B) Managers can be sentenced to maximum jail terms of up to 20 years for each violation.
C) Managers found guilty may keep any bonuses or profits from the misrepresentation if their
fines are less than such bonuses or profits.
D) Whistleblowers who secretly submit concerns about questionable accounting practices
will be fired.

Answer: B
Feedback: The Sarbanes-Oxley Act (SOX) increased maximum jail sentences to 20 years,
which can quickly add up because federal sentencing guidelines allow judges to declare
consecutive jail terms for each violation.

[QUESTION]
34. All of the following are requirements of the Sarbanes-Oxley Act (SOX) except:
A) evaluation and reporting on the effectiveness of internal control over financial reporting
by management for all public companies.
B) evaluation and reporting on the effectiveness of internal control over financial reporting
by external auditors only for large public companies.
C) establishment of an audit committee of independent directors to ensure the company’s
accounting, internal control, and audit functions are effective.
D) adoption of a code of ethics covering all employees.

Answer: D
Feedback: SOX requires public companies to adopt a code of ethics for their senior financial
officers.

[QUESTION]
35. The Sarbanes-Oxley Act (SOX) requires the establishment of an audit committee that
includes the:
A) president of the company.
B) chief financial officer of the company.
C) independent directors.
D) company’s external auditors.

Answer: C
Feedback: SOX requires all public companies to establish an audit committee of independent
directors.

[QUESTION]
36. Which of the following is not a change introduced by the Sarbanes-Oxley Act?
A) Management evaluate and report on the effectiveness of internal control over financial
reporting.
B) Publically traded companies must have their financial statements audited.
C) The company’s board of directors is required to establish an audit committee comprised of
independent directors.
D) Public companies must have tip lines that allow employees to secretly submit concerns
about questionable accounting or auditing practices.

Answer: B
Feedback: Publically traded companies have been required by the SEC to have their financial
statements audited long before the Sarbanes-Oxley Act.

[QUESTION]
37. Which of the following was not a change introduced by the Sarbanes-Oxley Act?
A) Limits on executive compensation for most companies
B) Stiffer fines and maximum jail sentences for willful misrepresentation of financial results
C) An external audit of the effectiveness of internal controls
D) Anonymous tip lines and legal protection to whistle-blowers

Answer: A
Feedback: The Sarbanes-Oxley Act enacted changes broadly designed to: counteract
incentives by imposing stiff penalties and maximum jail sentences; reducing opportunities for
fraud by requiring audit committees of independent directors and requiring an evaluation of
the effectiveness of internal control over financial reporting by management and, for large
public companies, by external auditors; and encouraging honesty by requiring public
companies to have anonymous tip lines and granting legal protection to whistleblowers. SOX
did not include provisions that set limits on executive compensation.

[QUESTION]
38. Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act?
A) Conceal fraud
B) Encourage good character
C) Counteract incentives for fraud
D) Reduce opportunities for fraud

Answer: A
Feedback: The objectives of the Sarbanes-Oxley Act (SOX) include measures to counteract
incentives to commit fraud, reduce fraud opportunities and improve companies’ internal
control over financial Reporting, and encourage honesty.

[QUESTION]
39. Internal controls are concerned with:
A) only manual accounting systems.
B) the extent of government regulations.
C) protecting against theft of assets and enhancing accounting information.
D) preparing income tax returns.

Answer: C
Feedback: Internal control consists of the actions taken to promote efficient and effective
operations, protect assets, enhance accounting information, and adhere to laws and
regulations.

[QUESTION]
40. The objectives of a company's system of internal control include all of the following
except:
A) completing work efficiently and effectively and protecting assets by reducing the risk of
fraud.
B) producing reliable and timely accounting information for use by people internal and
external to the organization.
C) ensuring the company’s stock price provides a reasonable return to investors.
D) adhering to laws and regulations.

Answer: C
Feedback: Internal control consists of the actions taken by people at every level of an
organization to achieve its objectives relating to operations, reporting, and compliance.
Internal controls are actions taken to promote efficient and effective operations, protect
assets, enhance accounting information, and adhere to laws and regulations. Ensuring a
reasonable return to investors through the stock price is not an objective of a company’s
system of internal control.

[QUESTION]
41. The main purposes of internal controls include all of the following except:
A) prevention of error, theft, and fraud.
B) promotion of operational efficiency.
C) ensuring compliance with laws and regulations.
D) providing more favorable financial information.

Answer: D
Feedback: Reporting objectives include producing reliable and timely accounting information
for use by people internal and external to the organization. Providing more favorable
financial information is not one of the main purposes of internal controls.

[QUESTION]
42. All of the following are goals of internal control except:
A) reducing the risk of fraud.
B) producing reliable and timely accounting information for use by people internal and
external to the organization.
C) minimizing the amount of income taxes that must be paid.
D) adhering to laws and regulations.

Answer: C
Feedback: Internal control consists of the actions taken by people at every level of an
organization to achieve its objectives. Those objectives include: operational objectives, which
focus on completing work efficiently and effectively and protecting assets by reducing the
risk of fraud; reporting objectives, which include producing reliable and timely accounting
information for use by people internal and external to the organization; and compliance
objectives, which focus on adhering to laws and regulations.

[QUESTION]
43. Which of the following is not a reason that a business needs an effective internal control
system?
A) Ensure that work is completed efficiently and effectively
B) Produce reliable and timely accounting information for use by people external to the
organization
C) Protect assets by reducing the risk of fraud
D) Identify ways to circumvent applicable laws and regulations

Answer: D
Feedback: The compliance objectives of internal control focus on adhering to (rather than
circumventing) laws and regulations.

[QUESTION]
44. The attitude that people in the organization hold regarding internal control is referred to
as the:
A) control environment.
B) control atmosphere.
C) risk assessment.
D) monitoring activities.

Answer: A
Feedback: The control environment refers to the attitude that people in the organization hold
regarding internal control.

[QUESTION]
45. The control components used by companies as a framework when analyzing their internal
control systems include all of the following except:
A) control environment.
B) compliance.
C) monitoring activities.
D) risk assessment.

Answer: B
Feedback: The control components used by companies as a framework when analyzing their
internal control systems include control environment, risk assessment, control activities,
information and communication, and monitoring activities.

[QUESTION]
46. The evaluation of the internal control system to determine whether it is working as
intended is referred to as:
A) the control environment.
B) information and communication.
C) risk assessment.
D) monitoring activities.

Answer: D
Feedback: The evaluation of the internal control system to determine whether it is working as
intended is referred to as monitoring activities.

[QUESTION]
47. Which of the following statement about internal control is not correct?
A) It guarantees the management will behave ethically.
B) It helps protect against the theft of assets.
C) It enhances the reliability of accounting information.
D) It promotes efficient and effective operations.

Answer: A
Feedback: Internal control includes actions taken to promote efficient and effective
operations, protect assets, enhance accounting information, and adhere to laws and
regulations. Internal control doesn't eliminate fraud or any other unethical behavior.

[QUESTION]
48. Which of the following is not one of the control components that are part of the
framework used when analyzing an internal control system?
A) risk assessment
B) control activities
C) information and communication
D) reconciliations

Answer: D
Feedback: Most organizations use the following control components as a framework when
analyzing their internal control systems: control environment, risk assessment, control
activities, information and communication, and monitoring activities.

[QUESTION]
49. The purpose of internal controls includes all of the following except:
A) improving efficiency.
B) producing timely accounting information.
C) minimizing errors.
D) completely eliminating fraud.

Answer: D
Feedback: Internal controls can never completely prevent and detect errors and fraud for two
reasons. First, an organization will implement internal controls only to the extent that their
benefits exceed their costs. A second limitation is that internal controls can fail as a result of
human error or fraud.

[QUESTION]
50. The principles of internal control include which of the following?
A) Use only computerized systems
B) Establish responsibility
C) Maintain perpetual inventory records
D) Eliminate fraud

Answer: B
Feedback: The five key principles of control activities are to establish responsibility, segregate
duties, restrict access, document procedures, and independently verify.

[QUESTION]
51. Segregation of duties means that a company assigns responsibilities so that:
A) sufficient workers are available to cover all necessary jobs.
B) responsibilities for related activities are assigned to two or more people.
C) employees are restricted to jobs for which they have adequate training.
D) workers are divided into those who do the same tasks but on different days.

Answer: B
Feedback: Segregation of duties is an internal control designed into the accounting system to
prevent an employee from making a mistake or committing a dishonest act as part of one
assigned duty and then also covering it up through another assigned duty. Segregation of
duties involves assigning responsibilities so that one employee cannot make a mistake or
commit a dishonest act without someone else discovering it.

[QUESTION]
52. Which principle of internal control states that you should not make one employee
responsible for all parts of a transaction?
A) Responsibility centers
B) Separation of duties
C) Restrict access
D) Procedure documentation

Answer: B
Feedback: Separation of duties states that you should not make one employee responsible for
all parts of a transaction.

[QUESTION]
53. If a company hires an auditor to check that the work done by others within the company
is supported by documentation, it is doing so under the principle of control activities referred
to as:
A) independent verification.
B) segregation of duties.
C) restrict access.
D) document procedures.

Answer: A
Feedback: A business can perform independent verification in various ways. The most
obvious is to hire someone (an auditor) to check that the work done by others within the
company is appropriate and supported by documentation.

[QUESTION]
54. The internal control principle related to assigning responsibilities so that one employee
cannot make a mistake or commit a dishonest act without someone else discovering it is
referred to as:
A) duplication of responsibility.
B) mandatory vacations.
C) segregation of duties.
D) rotation of duties.

Answer: C
Feedback: Segregation of duties refers to assigning responsibilities so that one employee
cannot make a mistake or commit a dishonest act without someone else discovering it.

[QUESTION]
55. The use of passcodes is an example of which internal control principle?
A) Segregate duties
B) Restrict access
C) Document procedures
D) Independently verify

Answer: B
Feedback: Companies restrict access to check-signing equipment, require a passcode to open
cash registers, and protect computer systems with firewalls.

[QUESTION]
56. Which of the following is not a commonly used internal control?
A) Mandatory vacations
B) Anonymous hotlines
C) Bonding employees
D) Consolidating duties

Answer: D
Feedback: Mandatory vacations, anonymous hotlines, bonding employees, and segregating
duties are commonly used internal controls.

[QUESTION]
57. Common control principles include all of the following, except:
A) outsource work to third parties.
B) segregate of duties.
C) independently verify.
D) restrict access to assets and information.

Answer: A
Feedback: Effective systems of internal control are based on five common principles: 1)
establishing responsibility, 2) segregating duties, 3) restricting access to assets or
information, 4) documenting procedures, and 5) independently verifying. Outsourcing work
to third parties is not an internal control procedure.

[QUESTION]
58. A small company would have the most difficulty in implementing which of the following
internal control principles?
A) Segregating duties
B) Restricting access to cash or information
C) Establishing responsibilities
D) Documenting procedures

Answer: A
Feedback: For smaller companies, the cost of hiring additional employees to fully segregate
duties exceeds the benefits.

[QUESTION]
59. Which of the following is not an example of internal control?
A) Use of passwords to restrict access to computer systems
B) Bonding employees
C) Periodic bank reconciliations
D) Customer satisfaction surveys

Answer: D
Feedback: The five principles of internal control include: establish responsibility, segregate
duties, restrict access (including the use of passwords), document procedures, and
independently verity (including periodic bank reconcilations). The five principles covered in
this section do not represent all possible forms of internal control. Many other policies and
procedures exist, such as bonding employees. Customer satisfaction surveys are not an
example of an internal control procedure.
[QUESTION]
60. Criminally minded employees have been known to override internal controls or do which
of the following to get around them?
A) Collude
B) Segregate duties
C) Disarm
D) Restrict access

Answer: A
Feedback: Criminally minded employees have been known to override (disarm) internal
controls or collude (work together) to get around them.

[QUESTION]
61. Which of the following is not a reason why it is especially important for companies to
have internal controls over cash?
A) Most businesses accept remote sources of payment on account.
B) The volume of cash transactions is enormous.
C) Cash is portable.
D) There is a high risk of theft of cash.

Answer: A
Feedback: Internal control for cash is important for two main reasons. First, because the
volume of cash transactions is enormous, the risk of cash-handling errors is significant.
Second, because cash is valuable, portable, and “owned” by the person who possesses it, it
poses a high risk of theft.

[QUESTION]
62. Cash sales rung up by cashiers totaled $117,000. Cash in the drawer was counted and found
to be $119,000. The journal entry to record the day’s sales would include a:
A) debit to Cash for $117,000.
B) credit to Cash Overage for $2,000.
C) credit to Sales Revenue for $119,000.
D) debit to Sales Revenue for $117,000.

Answer: B
Feedback: Cash would be debited for $119,000, Sales Revenue credited for $117,000, and Cash
Overage credited for $2,000.

[QUESTION]
63. A company’s cash receipts procedures include the following. Cashiers collect cash and
issue a receipt at the point of sale. Supervisors take custody of the cash at the end of each
cashier’s shift and deposit it in the bank. Accounting staff then ensure the receipts from cash
sales are properly recorded in the accounting system. Which internal control principle is most
evident with these procedures?
A) Restrict access
B) Segregate duties
C) Document procedures
D) Independently verify

Answer: B
Feedback: Segregating these duties ensures that those who handle the cash (cashiers and
supervisors) do not have access to those who record it (the accounting staff).

[QUESTION]
64. Which of the following is not one of the internal control functions performed by a cash
register?
A) Document the amount charged for each item sold
B) Perform the bank reconciliation
C) Restrict access to cash
D) Document the total cash sales

Answer: B
Feedback: The use of a cash register and its accompanying point-of-sale accounting system to
perform three important functions: (1) document the amount charged for each item sold, (2)
restrict access to cash, and (3) document the total cash sales.

[QUESTION]
65. The cashier uses the cash register and its accompanying point-of-sale accounting system
to perform three important functions. Which of the following is not one of those functions?
A) Document total cash sales
B) Document amount charged for each item sold
C) Segregate duties
D) Restrict access

Answer: C
Feedback: The cashier uses the cash register and its accompanying point-of-sale accounting
system to perform three important functions: (1) document the amount charged for each item
sold, (2) restrict access to cash, and (3) document the total cash sales.

[QUESTION]
66. The cash count sheet determines all of the following except the:
A) cash shortage or overage, if any.
B) amount of cash available for deposit in the bank
C) amount of cash to be reported on the balance sheet.
D) amount of cash received.

Answer: C
Feedback: By documenting the total cash sales, the cash register provides an independent
record of the amount of cash the cashier should have collected and passed on for deposit at
the bank. The cashier uses this information when completing a cash count sheet at the end of
each shift. The cash count sheet documents the amount of cash the cashier received and
determines any cash short or over that occurred during the shift. A cash count sheet does not
document the amount of cash reported on the balance sheet.