An internal control should design and implement to achieve some objectives. According to the definition
of internal control, another fundamental concept is about related objectives. These related objectives can
be categorized into three groups: Operations objectives, reporting objectives, and compliance objectives.

A cash budget is a document that shows the expected amount of cash receipt and payments for a period in the future. The correct answer is B.

In cash basis accounting, companies record revenues when they receive the cash and they record expenses when the cash is paid.

Net sales revenue = Sales Revenue – (Sales Returns and Allowances + Sales Discounts)

Turnover Ratio = Cost of Goods Sold divided by Average Merchandise Inventory

The correct answer is A.

Pressure is one of the components which is based on the effects of the stress factor on the management and other employees. The correct answer is A.

Accounts receivable is the amount owed to a company by customers as a result of delivering goods or services. It occurs when a business makes sales on credit.

For the preparation of financial statements, the starting point is the adjusted trial balance. Adjusted trial balance is one form of trial balance that holds in-term transactions’ totals and balances as well as the end of the period transactions’ totals and balances for final checking of the accounts and preparation of financial statements. 

Credit card companies provide convenience to customers of buying without having to pay at the moment. To retailers, these credit card companies provide benefit of not checking each customer’s credit rating or credit history. Also, there is no need for the businesses to keep account receivables for longer period of time or to carry out collection from their customers. Credit card companies are not providing these benefits for free. They are charging a commission fee of 1% to 5% normally on a sale. This means the businesses are not getting 100% of the face value of their
sale.
.

Risk Assessment: It is a process to identify and assess risks to the achievement of objectives. Accordingly, this process forms a basis to determine the way of risk management. The correct answer is C.

The correct answer is B. The principle of separation of duties may be ensured by the fact that the personnel who record cash receipts in the enterprise and perform bank reconciliations are different persons. Internal control is thus well designed. If these two tasks are performed by the same personnel, there is a possibility of embezzlement. The fact that staff records the amount of cash inflows and cash payments in the large ledger does not constitute an internal control violation since there is no cash access. The same personnel performing the tasks specified in A and E may not be a problem in terms of internal control in the enterprise since the tasks are independent. 

Accounting cycle can be defined as the process by which companies produce their financial statements for a specific period of time8 . As briefly mentioned, accounting cycle includes three main stages of activities; • beginning of the period activities • during the period activities • end of the period activities.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next. For example, assume that you are analyzing a company’s net income over a two-year period in which there was a decrease in net income from the first year to the second. Analysis of the income statement shows that Sales Revenue was almost the same for both years, but Cost of Goods Sold increased significantly, which resulted in decreases in gross profit and operating income. 

First-In, First-Out (FIFO) Method is an inventory costing method in which the first costs into inventory are the first costs out to cost of goods
sold. Ending inventory is based on the costs of the most recent purchases.

A             petty     cash       fund is a fund that contains small cash amounts to use for small expenditures.

Periodic Inventory System is an inventory system which relies upon physical count of the inventory to determine the ending inventory balance and cost of goods sold. In other words, no effort is made to keep up-todate records of either the inventory or cost of goods sold, physical count of inventory is made at specific intervals. The periodic inventory system requires businesses to obtain a physical count of inventory to determine quantities on hand. The system is normally used for relatively inexpensive goods, such as in a small, local store without optical-scanning cash registers that does not keep a running record of every loaf of bread and every key chain that it sells. The correct answer is A.

It can be calculated with an equation as follows:

Cash Ratio = (Cash + Cash Equivalents) / Total Current Liabilities

The correct answer is A.

The consistency principle holds that companies should use the same accounting methods and procedures in each accounting period, so that the information provided will help investors and creditors to compare a company’s financial statements from one period to the next.

ACFE developed a “Fraud Tree” with a broad perspective in 1996.

Separation of duties means dividing responsibilities between different people to prevent fraud and errors. Generally, smart management separates custody of assets, record keeping and authorization of transactions. In this context, the accounting department should be separated from all other operating departments. For example, a sales person who may have some premium from total sales shouldn’t approve or journalize the sales transactions. Likewise, in some cases, if a person is responsible for protecting some assets, he/she shouldn’t have any responsibility about the accounting process.