Finals

Question 1

are defined as resources owned or controlled by an entity that are expected to provide future economic benefits.

Answer 1

Assets

Question 2

No one person should control an asset and also keep the records for it. (Example: The person handling cash should be different from the person recording cash transactions.)

Answer 2

Segregation of Duties

Question 3

Purchases, sales, and disposals of assets should require proper management approval

Answer 3

Authorization and Approval

Question 4

Assets must be protected physically — like locking cash in a safe, using security cameras, or keeping inventory in secured areas.

Answer 4

Physical Safeguards

Question 5

Assets should be properly recorded with regular updates and reconciliations to detect any errors or fraud.

Answer 5

Record Keeping

Question 6

Regular internal and external audits help verify that assets exist and are used appropriately.

Answer 6

Periodic Audits

Question 7

It is the most vulnerable asset because it’s easy to steal and hard to trace once lost. That’s why companies need strong internal controls to protect it.

Answer 7

Cash

Question 8

Only authorized personnel should approve payments and sign checks.

Answer 8

Authorization of Transactions

Question 9

All cash received should be deposited into the bank daily — don’t leave it lying around.

Answer 9

Daily Deposits

Question 10

Regularly compare (reconcile) the company’s cash records with the bank statements to catch any discrepancies or fraud.

Answer 10

Bank Reconciliation

Question 11

To reduce handling of physical cash, use checks, direct deposits, and electronic fund transfers (EFTs).

Answer 11

Use of Electronic Payments

Question 12

Store inventory in locked warehouses with restricted access and security systems like cameras or guards.

Answer 12

Physical Security

Question 13

Perform regular physical counts (monthly, quarterly, or annually) and match them against inventory records to spot any discrepancies.

Answer 13

Inventory Counts

Question 14

Use purchase orders, receiving reports, and inventory records to track the movement of inventory at every step.

Answer 14

Proper Documentation

Question 15

Require manager approval for inventory purchases, adjustments, and write-offs.

Answer 15

Approval Processes

Question 16

Use software that updates inventory records in real-time as sales and purchases happen to maintain accuracy.

Answer 16

Perpetual Inventory System

Question 17

Before selling on credit, customers should go through a credit check and formal approval process.

Answer 17

Credit Approval

Question 18

Different employees should handle billing, recording payments, and approving credit to prevent fraud.

Answer 18

Segregation of Duties

Question 19

Issue invoices quickly and accurately, and send regular statements to customers to remind them of balances due.

Answer 19

Accurate Billing

Question 20

Regularly review aging reports (lists of unpaid invoices by how old they are) and follow up aggressively on overdue accounts.

Answer 20

Collection Monitoring

Question 21

Only managers should approve the writing off of bad debts, after full investigation and documentation.

Answer 21

Write-Off Authorization

Question 22

Match cash collections to customer accounts and bank deposits to detect theft or recording errors.

Answer 22

Bank Reconciliation

Question 23

All PPE purchases must be properly approved by management before buying.

Answer 23

Authorization of Purchases

Question 24

Record each asset with full details (cost, location, serial number, useful life, etc.) in a fixed asset register.

Answer 24

Accurate Recording

Question 25

Protect assets by securing them (e.g., fencing around buildings, locks on vehicles, maintenance for machinery).

Answer 25

Physical Safeguards

Question 26

Regularly inspect and count PPE to make sure it still exists and is in usable condition.

Answer 26

Periodic Physical Verification

Question 27

Properly calculate and record depreciation each year to reflect the asset’s loss of value over time.

Answer 27

Depreciation Monitoring

Question 28

Require formal approval and documentation when PPE is sold, scrapped, or otherwise disposed of.

Answer 28

Disposal Controls

Question 29

(like stocks, bonds, and other securities) are highly valuable and easy to misappropriate or lose in value, so companies need strong controls to protect, monitor, and properly account for them.

Answer 29

Financial investments

Question 30

Investment purchases and sales must be approved by top management or the board of directors.

Answer 30

Authorization of Investments

Question 31

Keep securities in secure locations — like with a trusted custodian bank or brokerage, not physically in the office.

Answer 31

Proper Custody

Question 32

Maintain detailed records for each investment (type, cost, market value, ownership, income earned).

Answer 32

Accurate Record-Keeping

Question 33

Regularly revalue investments based on fair market value and record any gains or losses properly.

Answer 33

Periodic Valuation

Question 34

Different employees should handle authorization, recording, and custody of investments to prevent fraud.

Answer 34

Segregation of Duties

Question 35

Regularly match the company's investment records with brokerage or custodian statements to catch any differences.

Answer 35

Reconciliation

Question 36

Ensure investments follow the company’s investment policy, legal rules, and risk limits

Answer 36

Monitoring Compliance