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1
Q

Administrative Processes

A

activities that either are specifically authorized by top managers or are used by managers to perform administrative functions

2
Q

Three administrative processes described in this chapter:

A

Source of capital processes
Investment processes
General ledger processes

3
Q
Which of the following is not part of an administrative process?
The sale of stock
The sale of bonds
The write-off of bad debts
The purchase of marketable securities
A

The write-off of bad debts

4
Q

Capital

A

is the funds used to acquire long-term, capital assets of an organization.

5
Q

Source of capital processes are those processes to

A

authorize the raising of capital,
the execution of raising capital, and
the proper accounting of that capital.

6
Q

Which of the following statements is not true regarding source of capital transactions?
These processes should not be initiated unless there is specific authorization by management at a top level.
Source of capital processes will result in potential dividend or interest payments.
Retirement of debt is a source of capital process.
The fact that these transactions and processes cannot occur without oversight by top management means other controls are not necessary.

A

The fact that these transactions and processes cannot occur without oversight by top management means other controls are not necessary.

7
Q

Management should

A

properly manage, or administer, the investment of excess funds.

8
Q

Investment processes are those processes which

A
authorize, 
execute, 
manage, and 
properly account for 
investments of excess funds.
9
Q
The officer within a corporation that usually has oversight responsibility for investment processes is the
controller.
treasurer.
chief executive officer (CEO).
chief accounting officer (CAO).
A

treasurer

10
Q

For both source of capital processes and investment processes, the important control is

A

the specific authorization and oversight by top management.

11
Q

Generally, the risks are not related to _____ fraud, but are instead related to _______ fraud.

A

employee

management

12
Q

Which of the following statements is true?

Routine transactions are recorded in the general journal.
Nonroutine transactions are entered in the general journal.
Nonroutine transactions are recorded in a subsidiary ledger.
Nonroutine transactions are recorded in a special journal.

A

Nonroutine transactions are entered in the general journal.

13
Q

Regarding subsidiary ledgers and general ledger control accounts, which of the following is not true?

Total balances in a subsidiary ledger should always equal the balance in the corresponding general ledger account.
The general ledger maintains details of subaccounts.
Control is enhanced by separating the subsidiary ledger from the general ledger.
Reconciling a subsidiary ledger to the general ledger can help to detect errors or fraud.

A

The general ledger maintains details of subaccounts.

14
Q

Common procedures associated with the general ledger:

A
Authorization of transactions 
Segregation of duties
Adequate records and documents
Security of the general ledger and documents
Independent checks and reconciliation
Cost-benefit considerations
15
Q

Which of the following statements regarding the authorization of general ledger posting is not true?

Posting to the general ledger always requires specific authorization.
User IDs and passwords can serve as authorization to post transactions to the general ledger.
A journal voucher serves as authorization for manual systems.
As IT systems become more automated, the authorization of general ledger posting is moved to lower levels of employees.

A

Posting to the general ledger always requires specific authorization.

16
Q

In a manual system with proper segregation of duties, an employee in the general ledger department should only
authorize posting to the general ledger.
post transactions to the general ledger.
reconcile the subsidiary ledger to the general ledger.
post transactions to the subsidiary ledger.

A

post transactions to the general ledger.

17
Q

External Reporting

Four general purpose financial statements

A

balance sheet,
income statement,
statement of cash flows, and
statement of retained earnings

are created from general ledger account balances.

18
Q

Internal Reporting

Internal reports are

A

usually not financial statements, but reports tailored to specific needs of each management level and function.

Many factors affect the type of report provided
Type of organization
Function managed
Time horizon

19
Q

Which of the following statements about reporting is true?

External users need detailed, rather than summarized, information.
All reports, internal and external, are derived only from general ledger data.
All organizations need similar internal reports.
Internal reports are tailored to the specific needs of each management level and function.

A

Internal reports are tailored to the specific needs of each management level and function.

20
Q

Reasons that unethical and fraudulent behavior would tend to be management-initiated.

A

First, in a properly controlled system, employees do not have access to related assets or source documents.
Second, administrative processes are tightly controlled and supervised by top management.
Finally, routine nature of processes such as sales, purchasing, payroll, and conversion generates a huge volume of transactions.

21
Q

Unethical Management Behavior in Capital Sources and Investing
Management should

A

be honest in the financial statements presented, footnote disclosures, and any related disclosures.
avoid misleading creditors about
the financial status of the company or
its ability to repay any borrowing.

22
Q

Internal Reporting ethical Issues

Top management has

A

an ethical obligation to use financial and other reports to encourage beneficial and ethical behavior.

23
Q

Reports to lower level managers are usually used

A

for two purposes.
Feedback to lower level managers.
Used by upper management to evaluate and reward the performance of lower level managers

24
Q

what is important to effective corporate governance.

A

Setting and monitoring financial goals, and establishing and maintaining reliable accounting journals and ledgers so that performance can be properly reported,

25
Q

In addition, internal controls and ethical practices within the administrative processes help ensure

A

proper financial stewardship of a company’s administrative resources.

26
Q

examples of admin processes

A

hiring - not typically done every day
debt equity financing
purchase fixed assets
financial recording

admin processes are done less often, don’t affect day to day operations

27
Q

all process maps should

A

end in recording

28
Q

who does investments?

A

treasurer

29
Q

most important control in capital and investment processes

A

authorization

30
Q

generally, risks

A

arent related to employee fraud, they’re related to management fraud

employee doesn’t have rights/authorization to commit fraud usually
possible control is bank having authorized signers

31
Q

preventative

A

mirrors to prevent theft

32
Q

detective

A

tags on clothes, finding and fixing

only detect after its done
helps you learn about the process, have new controls