Which of the following is not a major factor that contributes to small business fraud?
Inadequate employee prescreening
Too much trust
Excessive cash on hand
A shell company fraud involves:
stealing cash from an organization before it is recorded
stealing cash from an organization after it has been recorded
setting up a fake company and manufacturing false purchase orders, receiving reports, and invoices
A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor
When duties cannot be segregated, the most important internal control procedure is
To conceal the theft of a check from customers in payment of their accounts, which of the following journal entries should the bookkeeper make?
Debit Miscellaneous Expense; Credit Cash
Debit Petty; Credit Cash
Debit Cash; Credit Accounts Receivable
Debit Sales Returns; Credit Accounts Receivable
None of the above
Cash larceny involves stealing cash from an organization before it is recorded on the organization’s books and records
When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity?
segregation of duties
maintaining a general ledger
insuring debits equal credits in the accounting system
2 out of 2 points
Which of the following indicates a strong internal control environment?
the internal audit group reports to the audit committee of the board of directors
there is no segregation of duties between organization functions
there are questions about the integrity of management
adverse business conditions exist in the industry
Which of the following is not a limitation of the internal control system?
errors are made due to employee fatigue
fraud occurs because of collusion between two employees
the industry is inherently risky
management instructs the bookkeeper to make fraudulent journal entries
The external auditor is responsible for establishing and maintaining the internal control system.
Which of the following is NOT an element of the fraud triangle?