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13) Custody is transferred from the warehouse to the shipping department upon authorization of the

A. invoice.

B. customer order.
C. purchase order.

D. shipping order.

14) The most reliable evidence comes from

A. examining a sales invoice.
B. a negative confirmation.

C. a blank confirmation.

D. a positive confirmation.

15) Approval of credit sales by the credit department supports the assertion of

A. valuation or allocation.

B. existence or occurrence.

C. rights and obligations.

D. completeness.

16) A proof of cash is normally used

A. when control risk for cash is low.

B. for all engagements.

C. when lapping is suspected.

D. to test the transactions process when controls over cash are weak.

17) An enlightened management may decrease the probability of fraud in the company best by

A. stressing negative observations on their work to increase performance.

B. restricting authority for profit objective determination to top management.

C. establishing work teams that share responsibilities, performance, and bonuses based on collective efforts.
D. measuring performance and awarding bonuses on the basis of short-term operating results.

18) When counting cash on hand, the auditor must exercise control over all cash and other negotiable assets to prevent

A. substitution of stolen funds.
B. theft.

C. kiting.

D. lapping.

19) Inventory must be recorded when

A. the related revenue is recognized.

B. the company has title to it.

C. it is shipped from the vendor.

D. it is received.

20) Responsibility for the physical inventory count lies with the

A. client.

B. vendor.

C. inventory specialist.
D. auditor.

21) The source of authorization for preparation of materials requisitions is the

A. production plan.
B. bill of materials.
C. sales forecast.

D. purchase order.

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https://brainmass.com/business/cash-management/454170

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Solution Summary

Custody is transferred from the warehouse to the shipping department upon authorization of the

A. invoice.

B. customer order.
C. purchase order.

D. shipping order.

14) The most reliable evidence comes from

A. examining a sales invoice.
B. a negative confirmation.

C. a blank confirmation.

D. a positive confirmation.

15) Approval of credit sales by the credit department supports the assertion of

A. valuation or allocation.

B. existence or occurrence.

C. rights and obligations.

D. completeness.

16) A proof of cash is normally used

A. when control risk for cash is low.

B. for all engagements.

C. when lapping is suspected.

D. to test the transactions process when controls over cash are weak.

17) An enlightened management may decrease the probability of fraud in the company best by

A. stressing negative observations on their work to increase performance.

B. restricting authority for profit objective determination to top management.

C. establishing work teams that share responsibilities, performance, and bonuses based on collective efforts.
D. measuring performance and awarding bonuses on the basis of short-term operating results.

18) When counting cash on hand, the auditor must exercise control over all cash and other negotiable assets to prevent

A. substitution of stolen funds.
B. theft.

C. kiting.

D. lapping.

19) Inventory must be recorded when

A. the related revenue is recognized.

B. the company has title to it.

C. it is shipped from the vendor.

D. it is received.

20) Responsibility for the physical inventory count lies with the

A. client.

B. vendor.

C. inventory specialist.
D. auditor.

21) The source of authorization for preparation of materials requisitions is the

A. production plan.
B. bill of materials.
C. sales forecast.

D. purchase order.

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PAGE 3636 Student objective page 363
E8-1 Sue Ernesto is the owner of Ernesto's Pizza. Ernesto's is operated strictly on a carryout
basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash.
While at the counter, the customer can see other employees making the pizzas and the large
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Chapter 8: E8-3 PAGE 363 STUDENT OBJECTIVE 2 PAGE 336 AND SO PAGE 345
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1. The company accountant prepares the bank reconciliation and reports any discrepancies to
the owner.
2. The store manager personally approves all payments before signing and issuing checks.
3. Each week, Morgan leaves 100 company checks in an unmarked envelope on a shelf behind
the cash register.
4. After payment, bills are filed in a paid invoice folder.
5. The company checks are unnumbered.
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(a) For each procedure, explain the weakness in internal control, and identify the internal control
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Chapter 8: E8-6 PAGE 364 STUDENT OBJECTIVE 7 PAGE 353
E8-6 Lisa Ceja is unable to reconcile the bank balance at January 31. Lisa's reconciliation is
as follows.
Cash balance per bank $3,660.20
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Less: Bank service charge 25.00
Adjusted balance per bank $4,225.20
Cash balance per books $3,875.20
Less: Deposits in transit 530.00
Add: Outstanding checks 930.00
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(a) Prepare a correct bank reconciliation.
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Chapter 8: E8-8 PAGE 365 STUDENT OBJECTIVE 7 PAGE 363
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collection has not been recorded by Worthy, and no interest has been accrued.
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Instructions
(a) Prepare a bank reconciliation at July 31.
(b) Journalize the adjusting entries at July 31 on the books of Worthy Video Company.

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