Internal Control Systems (CXC CAPE)

A good internal control system:

I. Safeguard assets

II. Ensures records prepared are accurate and reliable

III. Encourages efficient use of resources.

• I and II

• II and III

• I and III

• I, II and III

Which of the following internal control principles attempts to limit fraud and safeguard assets?

• Segregation of duties

• Establishment of responsibilities

• Adequate documentation procedures

• Independent internal verification.

Which internal control tasks would be considered a priority in an inventory environment for documents?

• Updated and verified regularly

• Stored in a locked room

• Pre-numbered and prepared in duplicate

• Prepared by one person.

Internal auditors report:

I. Directly to the Board of Directors

II. To shareholders at the Annual General Meeting

III. To trade union workers/representatives.

• I

• II

• I and II

• II and III

One of the many benefits of a computerised accounting system is that:

I. It is slow in entering and retrieving data

II. It is fast and efficient in entering and retrieving data

III. Information is more accurate.

• I

• II

• III

• I and III

Drawbacks of internal controls are:

I. There may be collusion among employees.

II. Implementation costs may be higher than benefits.

III. The size of the organization may impede effective implementation.

• I

• I and II

• II and III

• I, II and III

Internal control is used in a business to safeguard assets and:

• Prevent Fraud

• Enhance the reliability of the accounting records

• Produce accurate financial statements

• Discourage employee dishonesty

Physical controls do not include:

• Safes and vaults to store cash

• Warehouses with locks to secure inventory

• Preparation of bank reconciliation

• Safety deposits boxes for important papers

Which of the following is NOT a principle of internal control?

• Segregation of duties

• Management responsibilty

• Documentation procedures

• Internal Checks

Permitting only designated people such as cashiers to handle cash receipts is an application of the principle of:

• Segregation of duties

• Establishment of responsibilties

• Documentation procedures

• Independent and internal verification

• Other controls