What is the control environment? How does the control environment affect a company’s internal controls? What are the negative and positive elements of a control environment? What are two examples of strong and weak internal controls in organizations where you have worked or have first-hand knowledge?
The control environment is the basis of the entire control system that the organization is establishing. The control environment is the value that is placed on integrity and the knowledge that unethical activity will not be tolerated. It is management’s responsibility to express behavior and attitude that enforces this ethical behavior. The control environment affects the internal control by setting a basis of control activities that safeguard assets, enhance accounting reliability, increase efficiency of operations, and compliance with laws and regulations. The negative elements of a control environment are that strict adherence must be applied continuously. Sometimes employees become overworked and underpaid and this is cause for concern because their level of carelessness goes up. Other times people might become slack in their duties over time. Some of the positive elements of a control environment are that responsibility does not lie on one person but many. Each part of a process requires several people to handle it therefore offering little opportunity to do wrong. Other positives are the process of that accountability is established and understood by each individual. An example of a weak internal control I witnessed was in a friend’s tanning bed business. The friend worked during the day and outlined how she expected her teenage employee’s to behave through policies and procedures. To my friends face the employees were the picture of a model employee but when she left in the evenings to go home and let them finish out the night the trouble would begin. The employees were letting all their friends tan for free, selling them tanning products and pocketing the cash. My friend finally put up a camera and goodness was she shocked at what was happening after she left for the evening. A strong control system that I have knowledge of is the system where I presently work...
IFRS 2-1: In what ways does the format of a statement of financial of position under IFRS often differ from a balance sheet presented under GAAP?
IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective ...
ACC290 Final Exam
1. Which financial statement is used to determine cash generated from operations?
A. Income statement
B. Statement of operations
C. Statement of cash flows
D. Retained earnings statement
2. In terms of sequence, in what order must the four basic financial statements be prepared?
A. Balance sheet, income statement, statement of cash flows, and capital statement
B. Income statement, capital statement, statement of cash flows, and balance sheet
C. Balance sheet, capital statement, statement of cash flows, and income statement
D. Income statement, capital statement, balance sheet, and statement of cash flows
3. In classifying transactions, which of the following is true in regard to assets?
A. Normal balances and increases are debits
B. Normal balances and decreases are credits
C. Normal balances can either be debits or credits for assets
D. Normal balances are debits and increases can be debits or credits
4. An increase in an expense account must be
C. either debited or credited, depending on the circumstances
5. ABC Corporation issues 100 shares of $1 par common stock at $5 per share, which of the following is the correct journal entry?
Paid-in Capital, Excess of Par $400
Common Stock $100
6. In the first month of operations, the total of the debit entries to the cash account amounted to $1,400 and the total of the credit entries to the cash account amounted to $600. The cash account has a
A. $600 credit balance
B. $1,400 debit balance
C. $800 debit balance
D. $800 credit balance
7. Which ledger contains control accounts?
A. Accounts receivable subsidiary ledger
B. General ledger
C. Accounts payable subsidiary ledger
D. General revenue and expense ledger
8. Smith is a customer of ABC Corporation. Smith typically purchases merchandise from ABC on account. Which ledger would ABC use to keep track of the details of Smith’s account?
A. Accounts receivable subsidiary ledger
B. Accounts receivable control ledger
C. General ledger
D. Accounts payable subsidiary ledger
9. Under the cash basis of accounting
A. revenue is recognized when services are performed
B. expenses are matched with the revenue that is produced
C. cash must be received before revenue is recognized
D. a promise to pay is sufficient to recognize revenue
10. Under the accrual basis of accounting
A. cash must be received before revenue is recognized
B. net income is calculated by matching cash outflows against cash inflows
C. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which the cash is paid or received
D. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
11. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is
A. debit Laundry Expense, $2,000; credit Laundry Expense $2,000
B. debit Laundry Expense, $4,500; credit Laundry Supplies Expense, $4,500
C. debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000
D. debit Laundry Supplies Expense, $4,500; credit Laun...