Accountancy Department

Quiz No. 2
Name of student: ____________________________________
Class Schedule: ____________________________________

Score: _______________
Date: _______________

Part I. TRUE OR FALSE

1. Employees should be made aware of the firm's commitment to ethics. __________
2. Controls in a computer based information system are identical to controls in a
manual system._________
3. Ethical issues and legal issues are essentially the same. ___________
4. Internal control systems are recommended but not required of firms. ____________
5. A key modifying assumption in internal control is that the internal control system is
the responsibility of management. ______________
Part II. MULTIPLE CHOICE QUESTIONS
6. All of the following are issues of computer security except
a. releasing incorrect data to authorized individuals
b. permitting computer operators unlimited access to the computer room
c. permitting access to data by unauthorized individuals
d. providing correct data to unauthorized individuals
7. Forces which may permit fraud to occur do not include
a. a gambling addiction
b. lack of segregation of duties
c. centralized decision making environment
d. questionable integrity of employees
8. Who is responsible for establishing and maintaining the internal control system?
a. the internal auditor
c. management
b. the accountant
d. the external auditor
9. A well designed purchase order is an example of a
a. preventive control
c. corrective control
b. detective control
d. none of the above
10. The bank reconciliation uncovered a transposition error in the books. This is an
example of
a. preventive control
c. corrective control
b. detective control
d. none of the above
11. Which of the following is the best reason to separate duties in a manual system?
a. to avoid collusion between the programmer and the computer operator
b. to ensure that supervision is not required
c. to prevent the record keeper from authorizing transactions
d. to enable the firm to function more efficiently
12. Which of the following is not an internal control procedure?
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a. Authorization
b. management's operating style

c. independent verification
d. accounting records

13. The decision to extend credit beyond the normal credit limit is an example of
a. independent verification
c. segregation of functions
b. authorization
d. supervision
14. When duties cannot be segregated, the most important internal control procedure is
a. Supervision
c. access controls
b. independent verification
d. accounting records
15. An accounting system that maintains an adequate audit trail is implementing which
internal control procedure?
a. access controls
c. independent verification
b. segregation of functions
d. accounting records
16. Employee fraud involves three steps. Of the following, which is not involved?
a. concealing the crime to avoid detection
b. stealing something of value
c. misstating financial statements
d. converting the asset to a usable form
17. The board of directors consists entirely of personal friends of the chief executive
officer. This indicates a weakness in
a. the accounting system
c. control procedures
b. the control environment
d. this is not a weakness
18. Business ethics involves
a. how managers decide on what is right in conducting business
b. how managers achieve what they decide is right for the business
c. both a and b
d. only a
19. All of the following are conditions for fraud except
a. false representation
c. intent
b. injury or loss
d. material reliance
20. Internal control system has limitations. These include
a. possibility of honest error
b. circumvention
c. management override
d. stability of systems

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