1. Realistic Sound’s unadjusted bank balance amounted to $3,000. Outstanding checks amounted to $500 and deposits in transit totaled $300. Based on this information alone, Realistic’s adjusted cash balance is:

a. $3,200 b. $3,300 c. $2,800 d. $2,700

2. Most annual reports now include a report of management to the stockholders. In this report, which group has the primary responsibility for the preparation and integrity of the financial statements?

a. Management b. The company’s CPAs c. The company’s internal audit staff d. The audit committee of the company’s board of directors

3. Which of the following represents the board of director’s subset that acts as a direct contact between stockholders and the independent accounting firm?

a. Audit committee b. Internal audit staff c. External auditors d. Stockholders’ representative

4. Which one of the following is a sound internal control procedure for cash disbursements?

a. Making copies of purchase orders for the receiving department so they know how many items to be expected upon delivery b. Using presigned checks to facilitate payment within the cash discount period c. Comparing purchase requisitions, purchase orders, receiving reports, and invoices d. Requiring the signature of the purchasing department supervisor on checks

5. Which one of the following situations reflects a weak internal control system?

a. All employees are well supervised b. A single employee is responsible for comparing a receiving report to an invoice c. All employees must take their vacations d. A single employee is responsible for collecting and recording of cash

6. Which one of the following is considered one of the six most important categories of internal control procedures? a. Computerized accounting systems b. The board of directors c. Proper authorizations d. Verification by government agencies

7. Which one of the following is not a generally recognized internal control procedure?

a. Internal review by the audit committee of the board of directors b. Independent verification of the work of one employee by another employee c. Independent review and appraisal by internal auditors d. Segregation of duties

8. If a company uses the direct write-off method of accounting for bad debts,

a. It is applying the matching principle b. It will record bad debt expense only when an account is determined to be uncollectible c. It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts d. It will report accounts receivable in the balance sheet at their net realizable value

9. If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

a. It violates the matching principle b. It will record bad debts only when an account is determined to be uncollectible c. It will reduce the accounts receivable at the end of the accounting period for estimated uncollectible accounts d. It will report accounts receivable in the balance sheet at their net realizable value.