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PART I MULTIPLE CHOICE CIRCLE THE CORRECT ANSWER

1. Section 404 of the Sarbanes-Oxley Act, Management Assessment of Internal Controls, includes all of the following except:

A statement of management's responsibility for establishing the internal control structure.

A waiver of auditor responsibility for assessing management's report on internal controls.

An assessment of the effectiveness of internal controls by management.

An assessment of the effectiveness of procedures for financial reporting by management.

A requirement that management include in its annual report an internal control report.

Which of the following i a typical internal control?

The use of password-protected computers and software.

The requirement that separate individuals authorize cash disbursements and sign checks.

The use of physical controls over inventories to prevent loss from theft.

A physical count of inventory at year-end to verify amounts shown on the company's accounting records.

All of these are typical internal controls.

Activity-based costing systems:

Use a single, volume-based cost driver.

Assign overhead to products based on the products' relative usage of direct labor.

Often reveal products that were under- or over-costed by traditional costed by traditional costing systems.

Typically use fewer cost drivers than more traditional costing systems.

Have a tendency to distort product costs.

Koski manufactures products J and K, applying overhead on the basis of labor hours. J, a low-volume product, requires a variety of complex manufacturing procedures. K, on the other hand, is both a high-volume product and relatively simplistic in nature. What would an activity-based costing system likely disclose about products J and K as result of Koski's current accounting procedures?

Undercosted Overcosted

J,K

J,K

J K

D. K J

E. None of the above, as both products are costed correctly.

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