Chapter 5 ACCT 2010

NSF checks from customers should be a _____ on a bank reconciliation

Subtraction from the book balance

What encourages the Sarbanes-Oxley (SOX) Act aim to encourage honesty and the reporting of dishonest acts?

Whistle blower protection Code of ethics Anonymous tip lines

establish responsibility

just one employee receives cash

Financial statement fraud

misreporting amounts in the financial statements, usually to portray more favorable financial results than what actually exist

A difference between an imprest payroll account and petty cash is petty cash is ___.

not held in a bank

3 components of the fraud triangle that relates to taking advantage of weak internal controls

opportunity rationalization incentive

To avoid duplicate payment, the voucher should be marked ____ as the final step in the voucher system

paid

Asset misappropriation

theft, embezzlement

what is subtracted from the bank balance on a bank reconciliation

Outstanding checks

limitations in internal control systems

collusion can exist making it impossible to completely prevent fraud A control may not be implemented because the cost of the control may exceed the benefit of reducing the fraud or potential errors.

The bank will show a customer's withdrawal as a ____.

debit, because a withdrawal decreases its liability from the bank's point of view

Bank reconciliation

An internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash

Among the new requirements of SOX is those who willfully misrepresent financial results

Face stiff fines and possible jail sentence

A check that you have written has cleared the bank when

Funds have been withdrawn from your bank account to cover the check

Incentives for committing fraud in order to satisfy personal greed include ____.

Getting a bigger paycheck Increasing personal wealth

Good internal control over cash requires cashiers to

Give a cash register receipt to every customer Restrict access to the cash register

The bank credited your account for a deposit made by another bank customer. This bank error should be a(n) ______ on a bank reconciliation.

Deduction from the book balance

EFT

Electronic Funds Transfer. Paying someone electronically by transferring from your account to someone else's.

The Sarbanes-Oxley (SOX) Act aims to reduce fraud by _____.

Encouraging honesty in employees Providing penalties for fraud Reducing opportunities

what would cause a bank statement not to agree with cash balance in the accounting records?

-the bank error in recording a deposit made by the company -the bank paid interest that the company has not recorded -deposits outstanding that have been recorded on the company records,but not the banks -the company made an error in recording a deposit

Which of these are cash equivalents?

- investments securities that are meant for short-term investing Investments within 3 months to maturity Money market funds

which are typical reconciling items on the book side of a reconciliation because the company did not know about these items until it got the bank statement?

-electrictronic funds transfer -service charges -interest income

Voucher

Collection of documents prepared in the process of approving, processing and documenting all purchases and payment on account

Recording money into a petty cash fund includes:

Debit petty cash Credit cash

In a bank reconciliation, interest revenue earned on the bank account balance is ____.

added to book balance

In a bank reconciliation, interest revenue earned on your bank balance is

added to book balance

deposits in transit are added to the _____ side of the bank reconciliation

bank

if the cash is collected is less than the amount per the register, then ____

cash shortage is debited

Place the order of the steps in documenting and controlling purchases in a voucher system with the first step listed on the top and final step at the bottom.

1. Request goods or services by submitting a purchase requisition 2. Prepare a purchase order after suppliers and prices have been approved 3. Prepare a receiving report 4. Prepare a supplier invoice and prepare the journal entry

principles underlying the internal control system include ?

1. documenting procedures 2. segregate duties 3. restrict access 4. independently verify 5. establish responsibility

Mandatory vacation:

A policy that is established to make it difficult for fraudsters to cover up their theft while they are away

Deposits in transit have already been ____

Added to your cash balance per your BOOKS and not the bank balance

deposits in transit occur when you make a deposit

After the banks normal business hours

An advantage of direct deposits is they ____

Are convenient and efficient

The 3 categories of employee fraud is ____.

Asset misappropriation Financial statement fraud Corruption

Which of the following poses a high risk of theft because of its high volume and ease of portability?

Cash

segregate duties

Cashiers collect cash and issue receipt at point of sale Supervisor collects cash at end of shift Accounting department ensures that cash sales are properly recorded The accounting does not have access to the cash The supervisor forwards the verified deposit slip to the accounting record to record the cash receipts a person different from whom receives the cash makes the deposit in the bank

Outstanding checks have already been ____

Deducted from your cash balance per your books but not the bank balance

the benefits of internal control procedures are that they

Improve the efficiency and effectiveness of operations Enhance the reliability of accounting info Protect against theft of assets

the quality of financial reporting for publicly traded companies is improved through

Obtaining an external audit Evaluating and reporting on the effectiveness of internal controls

Services provided by a bank help business control cash by

Restricting access and providing documentation and independent verification

___ is essential for safeguarding assets

Segregation of duties

independently verify

The accounting department compares the cashier's count sheet to the cash register and to the bank deposit slip. The supervisor reconciles the cashier's count sheet to the cash collected a company manager compares the cash count sheets with the bank deposit slip

documenting procedures

The accounting department records a journal entry for the cash receipts. - The supervisor prepares a deposit slip - cash receipts are summarized and their total is calculated

restrict access

The supervisor is responsible for keeping the cash safe and getting the cash to the bank

Good internal control over cash would include ______.

Two employees cannot share the same register Different employee deposits the cash at the bank Cash receipts are summaries and their total is calculated

Corruption

misusing ones position for inappropriate personal gain

NSF check stands for

non-sufficient funds

If a company hires an auditor to check that the work done by others within the company is supported by documentation, this is part of the internal control procedure of ____.

Independent verification