ch03Student: ___________________________________________________________________________1. According to COSO, internal control is a:  A. Process.B. Set of rules.C. Responsibility of employees only.D. Requirement only for publicly-traded firms. 2. Internal control is designed to provide:  A. Certainty.B. Freedom from fraud.C. Reasonable assurance.D. Truth. 3. According to the COSO definition, internal control should address objectives in all of the following categories except:  A. Company operations.B. Legal matters.C. External reporting.D. Fraud. 4. According to the COSO definition, internal control should promote ___ in financial reporting.  A. TruthB. AccuracyC. Both A and BD. Neither A nor B 5. Bumble Beasley was making a presentation on internal control to a group of prospective clients. Which of the following statements is the least appropriate for Bumble to make?  A. Responsibility for internal control should be shared throughout the organization.B. All companies must use the COSO definition of internal control as a guide.C. Internal controls are not designed specifically to prevent fraud.D. Part of internal control is ensuring that a company is making the best possible use of its resources. 6. Internal control relates to an organization’s achievement of objectives in three major categories. All of the following are examples of at least one category except:  A. Promoting compliance with the Sarbanes-Oxley Act.B. Ensuring that plant assets are listed on the balance sheet at their net book value.C. Developing a clear job description for each position in the company.D. Providing conclusive proof that fraud has occurred. 7. Internal control relates to an organization’s achievement of objectives in three major categories. Which of the following best pairs one of the categories with a specific example?  A. Effectiveness & efficiency of operations, fulfilling the requirements of the Foreign Corrupt Practices ActB. Effectiveness & efficiency of operations, listing appropriate assets at their current market valueC. Reliability of financial reporting, fulfilling the requirements of the Foreign Corrupt Practices ActD. Reliability of financial reporting, listing appropriate assets at their current market value8. Internal control relates to an organization’s achievement of objectives in three major categories. Which of the following best pairs one of the categories with a specific example?  A. Reliability of financial reporting, reconciling the bank statement at least monthlyB. Reliability of financial reporting, following the COSO internal control frameworkC. Compliance with all known laws and regulations, following the COSO internal control frameworkD. Compliance with all known laws and regulations, fulfilling the requirements of the Foreign Corrupt Practices Act 9. Internal control relates to an organization’s achievement of objectives in three major categories. Which of the following pairs gives an example of two controls that fulfill a single category?  A. Fulfilling the requirements of the Foreign Corrupt Practices Act, developing a clear job description for each position in the companyB. Developing a clear job description for each position in the company, calculating profits on the accrual basisC. Fulfilling the requirements of the Foreign Corrupt Practices Act, calculating profits on the accrual basisD. Ensuring that plant assets are listed on the balance sheet at their net book value, listing appropriate assets at their current market value 10. Purposes of internal control include:  A. Safeguarding assets.B. Ensuring financial statement reliability.C. Promoting operational efficiency.D. All of the above. 11. Internal control has four major purposes in organizations. Ways to achieve at least one of the four include: (i) keeping cash in a bank, (ii) conducting a new employee orientation.  A. I only.B. II only.C. Both I and II.D. Neither I nor II. 12. Internal control has four major purposes in organizations. Ways to achieve at least one of the four include: (i) requiring supervisory review of how complex transactions are recorded in the journal, (ii) using general ledger software such as Peachtree.  A. I only.B. II only.C. Both I and II.D. Neither I nor II. 13. Omar is a general manager at FRD Corporation. He recently attempted to reorganize FRD from three departments of ten people each to six departments of five people each. Which purpose of internal control is most likely to be impacted by the change?  A. Safeguarding assetsB. Ensuring financial statement reliabilityC. Promoting operational efficiencyD. Uncovering fraud 14. Shawn is an accountant at LNT Corporation. He maintains the company’s accounting data on his computer’s local hard drive, but does not back it up on any regular schedule. LNT Corporation’s risk is most related to which purpose of internal control?  A. Safeguarding assetsB. Ensuring financial statement reliabilityC. Encouraging compliance with management directivesD. Properly backing up data every day15. ANF Corporation’s company procedures manual is available to all employees on the corporate network, while RSP Corporation distributes a hard copy of its company procedures manual to all new employees. Which of the following statements is most true?  A. Because the procedures manual would be reported as an asset on the balance sheet, RSP is doing a better job safeguarding its assets.B. Because the procedures manual would be reported as an asset on the balance sheet, ANF is doing a better job safeguarding its assets.C. ANF employees are more likely to comply with management directives than RSP employees.D. The method of distributing the procedures manual is unlikely to be related to ensuring financial statement reliability. 16. CPY Corporation replaces one third of its computers every year; SLP Corporation replaces its computers when employees submit a request, but no more frequently than once every four years. Which of the following statements is most true?  A. CPY’s replacement policy does a better job safeguarding assets.B. SLP’s replacement policy does a better job safeguarding assets.C. Neither replacement schedule helps achieve the internal control purpose of safeguarding assets, but replacing a computer may help promote operating efficiency.D. Neither replacement schedule helps achieve the internal control purpose of