WSU ACCTG 230 EXAM SCRIPT 1 2026
QUESTIONS WITH SOLUTIONS GRADED A+
◉ Sarbanes-Oxley Act of 2002 (SOX). Answer: SOX requires public
companies to evaluate their internal control and to publish those
findings with their SEC filings.
Section 404 requires a statement of management's responsibility for
establishing and maintaining adequate internal control over
financial reporting by public companies.
◉ What five interrelated components does SOX assess a company's
controls by?. Answer: 1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
◉ Separation of Duties (Internal Control). Answer: Internal Control
feature of assigning the functions of authorization, recording, and
custody to different individuals.
,◉ Bonded Employees (Internal Control). Answer: Insurance policy
that a company buys to insure itself against loss due to employee
dishonesty.
◉ Required Absences (Internal Control). Answer: Employees should
be required to take regular vacations and their duties should be
rotated periodically.
◉ Procedures Manual (Internal Control). Answer: Appropriate
accounting procedures should be documented in a procedures
manual.
◉ Authority and Responsibility (Internal Control). Answer: A
document that outlines the chain of command for authority and
responsibility. The authority manual provides guidelines for specific
positions such as personnel officer as well as general authority, such
as all VPs are authorized to spend up to a designated limit.
◉ Prenumbered Documents (Internal Control). Answer: Companies
can keep a record of their check numbers to see if numbers ever go
missing and to avoid the unauthorized use of their bank accounts.
Prenumbered forms are used for all important documents such as
purchase orders, receiving reports, invoices, and checks. Documents
should also allow for authorized signatures.
, ◉ Physical Control (Internal Control). Answer: Companies should
establish adequate physical control over valuable assets.
◉ Performance Evaluations (Internal Control). Answer: Internal
Controls should include independent verification of employee
performance as few people can evaluate their performance
objectively.
◉ What are the limitations of internal control activities?. Answer: -
Collusion among employees
- Management override
- Human Error
◉ 10 features of an internal control system. Answer: 1. Separation of
Duties
2. Hiring and Training competent employees
3. Bonding employees to recover losses through insurance
4. Requiring employees take vacations
5. Establishing proper procedures for processing transactions
6. Establish clear lines of authority/responsibility
7. Use prenumbered documents
8. Physical Controls
9. Conducting performance evaluations through independent
internal and external audits
QUESTIONS WITH SOLUTIONS GRADED A+
◉ Sarbanes-Oxley Act of 2002 (SOX). Answer: SOX requires public
companies to evaluate their internal control and to publish those
findings with their SEC filings.
Section 404 requires a statement of management's responsibility for
establishing and maintaining adequate internal control over
financial reporting by public companies.
◉ What five interrelated components does SOX assess a company's
controls by?. Answer: 1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
◉ Separation of Duties (Internal Control). Answer: Internal Control
feature of assigning the functions of authorization, recording, and
custody to different individuals.
,◉ Bonded Employees (Internal Control). Answer: Insurance policy
that a company buys to insure itself against loss due to employee
dishonesty.
◉ Required Absences (Internal Control). Answer: Employees should
be required to take regular vacations and their duties should be
rotated periodically.
◉ Procedures Manual (Internal Control). Answer: Appropriate
accounting procedures should be documented in a procedures
manual.
◉ Authority and Responsibility (Internal Control). Answer: A
document that outlines the chain of command for authority and
responsibility. The authority manual provides guidelines for specific
positions such as personnel officer as well as general authority, such
as all VPs are authorized to spend up to a designated limit.
◉ Prenumbered Documents (Internal Control). Answer: Companies
can keep a record of their check numbers to see if numbers ever go
missing and to avoid the unauthorized use of their bank accounts.
Prenumbered forms are used for all important documents such as
purchase orders, receiving reports, invoices, and checks. Documents
should also allow for authorized signatures.
, ◉ Physical Control (Internal Control). Answer: Companies should
establish adequate physical control over valuable assets.
◉ Performance Evaluations (Internal Control). Answer: Internal
Controls should include independent verification of employee
performance as few people can evaluate their performance
objectively.
◉ What are the limitations of internal control activities?. Answer: -
Collusion among employees
- Management override
- Human Error
◉ 10 features of an internal control system. Answer: 1. Separation of
Duties
2. Hiring and Training competent employees
3. Bonding employees to recover losses through insurance
4. Requiring employees take vacations
5. Establishing proper procedures for processing transactions
6. Establish clear lines of authority/responsibility
7. Use prenumbered documents
8. Physical Controls
9. Conducting performance evaluations through independent
internal and external audits
