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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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ANALYSIS OF MULTIPLE-CHOICE TYPE QUESTIONS

  1. (L.O. 1) One of the main objectives of a good system of internal control is to:
    1. increase sales.
    2. provide a means of gathering information about competitors.
    3. prevent errors and irregularities in the accounting records.
    4. prosecute employees who embezzle from the company.

    Approach and Explanation: Mentally define internal control before you look at the answer selections. Internal control consists of the plan of organization and all the related methods and measures adopted within a business to:

    1. Safeguard its assets from employee theft, robbery, and unauthorized used.
    2. Enhance the accuracy and reliability of its accounting records by reducing the risks of errors (unintentional mistakes) and irregularities (intentional mistakes and misrepresentations) in the accounting process.
    3. Increase efficiency of operations.
    4. Ensure compliance with laws and regulations. (Solution = c.)
  2. (L.O. 1) Irregularities are also known as:
    1. errors.
    2. unintentional mistakes.
    3. fraud.
    4. defects in internal control.

    Explanation: Errors are unintentional mistakes. Irregularities are intentional mistakes and misrepresentations; irregularities are also called fraud. Irregularities can occur even in a company with adequate internal control when a situation such as collusion exists. (Solution = c.)

  3. (L.O. 2) The basic internal control principle that is being applied when the work assignment for one employee is designed to check on the work of another employee is:
    1. independent internal ...

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