COSO 51 Quiz Questions with
explanations
A (*Correct Answer* The treasurer's department should have custody
of assets but should not authorize or record transactions. Because the
assistant treasurer reports to the treasurer, the treasurer is merely
delegating an assigned duty related to asset custody.) - Correct
Answer ✔️✔️[ 1 ] Internal control should follow certain basic
principles to achieve its objectives. One of these principles is the
segregation of functions. Which one of the following examples does
not violate the principle of segregation of functions?
A. The treasurer has the authority to sign checks but gives the
signature block to the assistant treasurer to run the checksigning
machine.
,B. The warehouse clerk, who has the custodial responsibility over
inventory in the warehouse, may authorize disposal of damaged
goods.
C. The sales manager has the responsibility to approve credit and the
authority to write off accounts.
D. The department time clerk is given the undistributed payroll checks
to mail to absent employees.
C (*Correct Answer* Segregation of duties among key functions is an
important control procedure. An accounts receivable clerk who is
permitted to approve sales returns and allowances and also receive
customer remittances could misappropriate funds received and cover
the shortage by debiting sales returns and allowances. Limited
supervision is insufficient to compensate for lack of segregation of
duties.) - Correct Answer ✔️✔️[ 2 ] Which one of the following
is most likely to be considered an internal control weakness?
,A. The petty cash custodian has the ability to steal petty cash.
Documentation for all disbursements from the fund must be
submitted with the request for replenishment of the fund.
B. An inventory control clerk at a manufacturing plant has the ability
to steal one completed television set from inventory a year. The theft
probably will never be detected.
C. An accounts receivable clerk, who approves sales returns and
allowances, receives customer remittances and deposits them in the
bank. Limited supervision is maintained over the employee.
D. A clerk in the invoice processing department fails to match a
vendor's invoice with its related receiving report. Checks are not
signed unless all appropriate documents are attached to a voucher.
B (*Correct Answer* Sequentially numbered receipts should be issued
to maintain accountability for cash collected. Such accountability
should be established as soon as possible because cash has a high
inherent risk. Daily cash receipts should be deposited intact so that
, receipts and bank deposits can be reconciled. The reconciliation
should be performed by someone independent of the cash custody
function.) - Correct Answer ✔️✔️[ 3 ] Which of the following
describes the most effective preventive control to ensure proper
handling of cash receipt transactions?
A. Have bank reconciliations prepared by an employee not involved
with cash collections and then have them reviewed by a supervisor.
B. One employee issues a prenumbered receipt for all cash
collections; another employee reconciles the daily total of
prenumbered receipts to the bank deposits.
C. Use predetermined totals (hash totals) of cash receipts to control
posting routines.
D. The employee who receives customer mail receipts prepares the
daily bank
explanations
A (*Correct Answer* The treasurer's department should have custody
of assets but should not authorize or record transactions. Because the
assistant treasurer reports to the treasurer, the treasurer is merely
delegating an assigned duty related to asset custody.) - Correct
Answer ✔️✔️[ 1 ] Internal control should follow certain basic
principles to achieve its objectives. One of these principles is the
segregation of functions. Which one of the following examples does
not violate the principle of segregation of functions?
A. The treasurer has the authority to sign checks but gives the
signature block to the assistant treasurer to run the checksigning
machine.
,B. The warehouse clerk, who has the custodial responsibility over
inventory in the warehouse, may authorize disposal of damaged
goods.
C. The sales manager has the responsibility to approve credit and the
authority to write off accounts.
D. The department time clerk is given the undistributed payroll checks
to mail to absent employees.
C (*Correct Answer* Segregation of duties among key functions is an
important control procedure. An accounts receivable clerk who is
permitted to approve sales returns and allowances and also receive
customer remittances could misappropriate funds received and cover
the shortage by debiting sales returns and allowances. Limited
supervision is insufficient to compensate for lack of segregation of
duties.) - Correct Answer ✔️✔️[ 2 ] Which one of the following
is most likely to be considered an internal control weakness?
,A. The petty cash custodian has the ability to steal petty cash.
Documentation for all disbursements from the fund must be
submitted with the request for replenishment of the fund.
B. An inventory control clerk at a manufacturing plant has the ability
to steal one completed television set from inventory a year. The theft
probably will never be detected.
C. An accounts receivable clerk, who approves sales returns and
allowances, receives customer remittances and deposits them in the
bank. Limited supervision is maintained over the employee.
D. A clerk in the invoice processing department fails to match a
vendor's invoice with its related receiving report. Checks are not
signed unless all appropriate documents are attached to a voucher.
B (*Correct Answer* Sequentially numbered receipts should be issued
to maintain accountability for cash collected. Such accountability
should be established as soon as possible because cash has a high
inherent risk. Daily cash receipts should be deposited intact so that
, receipts and bank deposits can be reconciled. The reconciliation
should be performed by someone independent of the cash custody
function.) - Correct Answer ✔️✔️[ 3 ] Which of the following
describes the most effective preventive control to ensure proper
handling of cash receipt transactions?
A. Have bank reconciliations prepared by an employee not involved
with cash collections and then have them reviewed by a supervisor.
B. One employee issues a prenumbered receipt for all cash
collections; another employee reconciles the daily total of
prenumbered receipts to the bank deposits.
C. Use predetermined totals (hash totals) of cash receipts to control
posting routines.
D. The employee who receives customer mail receipts prepares the
daily bank
