ACC 131, ISU - CH4, CH5, CH6 Exam Questions and Answers Fully Solved Latest Version 2025-
2026
Internal Control System - Answers A system of policies, activities, procedures, and control
environments designed and established to protect and support the business
Controlled Environment - Answers The collection of environmental factors that influence the
effectiveness of control procedures
Elements of a Controlled Environment - Answers Management operating philosophy and
company culture
Risk Assessment - Answers ID uncertainties and how to respond to external and internal risks
External Risks - Answers Competitors, customers, and substitute good/services
Internal Risks - Answers High volume/low costs, inventory control and supply chain
management
Control Activities - Answers the policies and procedures that top management establishes to
help ensure its objectives are met
Control Activities Explained - Answers Safeguard the assets (cash, inventory, and buildings),
enhance the reliability and accuracy of our record keeping, promote efficient operations
Examples of control activities - Answers Segregation of duties, making independent checks on
recorded amounts
Cash Equivalents - Answers Short-term, highly liquid investments that are readily convertible to
cash and have original maturities of three months or less
Cash Controls - Answers Bank reconciliation, cash over and short, and petty cash
Bank Reconciliation - Answers The process of reconciling any differences between a company's
accounting records and the bank's accounting records
Outstanding Check - Answers A check that has been issued and recorded by the business but
has not been "cashed" by the recipient of the check (recorded by business, needs to be added to
bank record)
Deposit in Transit - Answers An amount received and recorded by a company, but which has not
been recorded by the bank in time to appear on the current bank statement (recorded by
business, needs to be added to bank record)
Service Charge - Answers Fees charged by the bank for services provided (on bank record,
needs to be added to business record)
, Non-Sufficient Funds Checks - Answers A check that has been returned to the depositor
because funds in the issuer's account are not sufficient to pay the check (on bank record, needs
to be added to business record)
Errors in Recording - Answers difference needs to be accounted for on the business's end
Cash Over and Short - Answers An account that records the discrepancies between deposited
amounts of actual cash received and the total of the cash register tape
Petty Cash - Answers A fund used to pay for small dollar amounts
Internal control systems provide reasonable assurance that the company's objectives are being
met in three areas: - Answers Effectiveness and efficiency of operations, reliability of financial
reporting, compliance with applicable laws and regulations
Internal Control System includes the following... - Answers 1. The control environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
Intangible Assets - Answers 1. Plans
2. Personnel Information
3. Trade Secrets
4. Customer List
5. New Technology
Limitations of Internal Control - Answers 1. Human Error - unintentional and intentional
2. Collusion
Multiple Choice Quiz 4 - Answers
What is the primary role of internal controls in managing a business? - Answers c. To contain
subordinates' activities in order to prevent employees from deviating from the scope of their
responsibilities and encouraging g them to act in the best interest of the business
Which of the following is not one of the three areas for which internal control systems are
intended to provide recent assurance? - Answers d. Certification that the financial statements
are without error
2026
Internal Control System - Answers A system of policies, activities, procedures, and control
environments designed and established to protect and support the business
Controlled Environment - Answers The collection of environmental factors that influence the
effectiveness of control procedures
Elements of a Controlled Environment - Answers Management operating philosophy and
company culture
Risk Assessment - Answers ID uncertainties and how to respond to external and internal risks
External Risks - Answers Competitors, customers, and substitute good/services
Internal Risks - Answers High volume/low costs, inventory control and supply chain
management
Control Activities - Answers the policies and procedures that top management establishes to
help ensure its objectives are met
Control Activities Explained - Answers Safeguard the assets (cash, inventory, and buildings),
enhance the reliability and accuracy of our record keeping, promote efficient operations
Examples of control activities - Answers Segregation of duties, making independent checks on
recorded amounts
Cash Equivalents - Answers Short-term, highly liquid investments that are readily convertible to
cash and have original maturities of three months or less
Cash Controls - Answers Bank reconciliation, cash over and short, and petty cash
Bank Reconciliation - Answers The process of reconciling any differences between a company's
accounting records and the bank's accounting records
Outstanding Check - Answers A check that has been issued and recorded by the business but
has not been "cashed" by the recipient of the check (recorded by business, needs to be added to
bank record)
Deposit in Transit - Answers An amount received and recorded by a company, but which has not
been recorded by the bank in time to appear on the current bank statement (recorded by
business, needs to be added to bank record)
Service Charge - Answers Fees charged by the bank for services provided (on bank record,
needs to be added to business record)
, Non-Sufficient Funds Checks - Answers A check that has been returned to the depositor
because funds in the issuer's account are not sufficient to pay the check (on bank record, needs
to be added to business record)
Errors in Recording - Answers difference needs to be accounted for on the business's end
Cash Over and Short - Answers An account that records the discrepancies between deposited
amounts of actual cash received and the total of the cash register tape
Petty Cash - Answers A fund used to pay for small dollar amounts
Internal control systems provide reasonable assurance that the company's objectives are being
met in three areas: - Answers Effectiveness and efficiency of operations, reliability of financial
reporting, compliance with applicable laws and regulations
Internal Control System includes the following... - Answers 1. The control environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring
Intangible Assets - Answers 1. Plans
2. Personnel Information
3. Trade Secrets
4. Customer List
5. New Technology
Limitations of Internal Control - Answers 1. Human Error - unintentional and intentional
2. Collusion
Multiple Choice Quiz 4 - Answers
What is the primary role of internal controls in managing a business? - Answers c. To contain
subordinates' activities in order to prevent employees from deviating from the scope of their
responsibilities and encouraging g them to act in the best interest of the business
Which of the following is not one of the three areas for which internal control systems are
intended to provide recent assurance? - Answers d. Certification that the financial statements
are without error
