AC 210 chapter 5: fraud, internal control, and cash

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

this document indicates the date, quantity, and condition of the goods. It is then sent to the accounting department to notify the purchase can be recorded.

receiving report

which of the following are true regarding a bank statement?

- It may include NSF checks - It may include interest earned - It lists all checks that have cleared the bank - It may include service charges

the 3 categories of employee fraud are:

- asset misappropriation - financial statement fraud - corruption

why might a bank statement and the company's records differ?

- customer checks that bounced (NSF) - not all checks written cleared the bank - deposits were made at the end of the bank statement date in an ATM

which of the following reconciling items on a bank reconciliation need to be recorded in the company's record to adjust its cash balance so that its up to date?

- customer's check rejected by the bank as NSF - interest revenue - EFT received from customers discovered on the bank statement - deposits in transit

in a bank reconciliation, interest revenue earned on the bank account balance is _______

added to the book balance

deposits in transit occur when you make a deposit _______

after the bank's normal business hours

while preparing the bank reconciliation for March, the accountant for ABC Company discovered that a $694 check in payment of an account payable had been entered incorrectly in the journal as $649. what is true about this?

an adjusting entry must be made to debit accounts payable and credit cash for $45.

a common principle of internal control is to __________.

assign each task to one employee

when a check is presented to a bank for a payment and the amount is deducted from the payer's account, the check is said to have ______ the bank.

cleared

a ________ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts

direct

which principle of internal control enhances assurance that all transactions, checks and other business activities have been accounted for?

document procedures

EFT

electronic funds transfer

purchase order

ensures the order is placed with an approved supplier at approved prices.

purchase requisition

ensures the request is made by someone who is approved to order goods or services of the type and amount requested.

cash _______ are short-term, highly ________ investments purchased within ________ of maturity.

equivalents; liquid; 3 months

t/f: accountants are spending more of their time on executing the basic steps of a voucher system that has been spent in the past.

false

anonymous _______ allow anyone to tip off independent auditors about suspected fraud.

hotlines

a(n) _________ system controls the amount paid to others by limiting the total amount of money available for making payments.

imprest

firing employees if they are not meeting a certain performance target _______ the risk that others will commit fraud in the future.

increases

which of the following would be added to your cash balance based on the information on your bank statement?

interest deposited

bank reconciliation

is 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.

direct deposit

is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts

supplier invoice

is used to ensure that the appropriate amount is paid for goods received.

receiving report

is used to verify amounts ordered agree with the suppliers actual shipment.

this month's bank statement shows that the bank incorrectly credited ABC Corp.'s account for a $600 deposit that should have been credited to XYZ Corp.s account. how would this item be treated on ABC's bank reconciliation?

it would be deducted from the bank balance

_________ is one of the 3 fraud triangle components where the fraudsters perceive the misdeed is unavoidable or justified

rationalization

which is used to avoid the time and cost of writing checks for business expenses that are small in amount and is controlled by limiting the amount in it and subjecting it to surprise audits

petty cash

the bank will show a customer's deposit on bank statements as a _________.

credit, because a deposit is a liability from the bank's point of view.

in preparing your bank reconciliation, you notice that you recorded a deposit as $100 instead of $10. you should ________

subtract $90 from your cash and make an entry.

service charges are _______ of a bank reconciliation

subtracted from the book's balance

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

subtraction from the book balance

to avoid duplicate payment, the voucher should be marked "______" as the final step in the voucher system.

paid

If the company's accountant mistakenly recorded a $58 deposit as $85, the error would be shown on the bank reconciliation as

$27 deduction from the book balance

Acme, Inc.'s books show an ending cash balance of $10,000 before preparing the bank reconciliation. Given the bank reconciliation shows outstanding checks of $3,000, deposits in transit of $2,000, NSF check of $100, and interest earned on the bank account of $10, the company's up-to-date ending cash balance equals:

$9,910

bank reconciliations are needed to reconcile for ________

- outstanding checks - deposits in transit

on a bank reconciliation, which of the following are typical reconciling items the bank would not know about because of time lags?

- outstanding checks - deposits in transit

violating loan covenants could lead to:

- repaying the loan balance right away - paying higher interest rates - being forced to put up extra collateral

which parts of the Sarbanes-Oxley (SOX) Act may encourage employees to be honest?

- requiring a code of ethics - requiring anonymous tip lines - providing legal protection to whistle-blowers

what 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?

- service charges - interest income - electronic funds transfer

some managers commit fraud because they are under great pressure to report a high net income to meet ___________.

- shareholders' expectations - loan covenant requirements - financial analysts' earnings forecasts

deposits in _____ are added to the _____ (bank/book) side of the bank reconciliation.

- transit - bank

additional mechanisms of internal control include

-anonymous hotlines -bonding -mandatory vacations

steps in documenting and controlling purchases in a voucher system:

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

this month's bank statement shows interest earned of $45. how would this item be treated on the bank reconciliation?

It would be added to the book balance

If a cashier rang up sales totaling $5,096, but had $5,100 to deposit, which journal entry would be recorded?

a debit to cash of $5,100, a credit to cash overage of $4, and a credit to sales revenue of $5,096.

which of the following poses a high risk of theft because of its high volume and ease of profitability?

cash

If the cash collected is greater than the amount per the cash register, then ________.

cash overage is credited

If the cash collected is less than the amount per the casher register, then

cash shortage is debited

the bank will show a customer's withdrawal as a:

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

in a bank reconciliation, an outstanding check is ________

deducted from the bank balance

outstanding checks written by the company should be a __________ on the company's bank reconciliation.

deduction from the bank balance

which of the following reconciling items does not require a journal entry?

deposit in transit

an incentive to commit fraud may be caused by managers who receive bonus payments based on the strength of the company's reported ________.

net income

NSF

non-sufficient funds

If the bank makes an error by depositing your check into another depositor's account, then you should ______ and contact the bank.

not change your records

control environment

refers to helping people in the organization to understand the importance of internal control

risk assessment

refers to the continuous evaluation of the potential for fraud

information and communication

refers to the documentation of activities that promote effective internal controls

monitoring activities

refers to the evaluation of internal controls to determine if they are working as intended

control activities

refers to the work responsibilities and duties completed to reduce risks to an acceptable level

the ________ principle of internal control requires the use of firewalls and passwords.

restrict access

_______ cash must be reported separately on the balance sheet because it is legally or contractually required to be set aside for a specific purpose.

restricted

increasingly, the basic steps of the voucher system are performed using _______ process automation, which combines automation and artificial intelligence.

robotic

this document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting periods.

supplier invoice

independent verification

the accounting department compares the cashier's count sheet to the cash register and to the bank deposit slip.

segregation of duties

the accounting department does not have access to the cash.

document procedures

the accounting department records a journal entry for the cash receipts.

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

vacation

electronic funds transfer (EFT) discovered on the bank statement __________.

will need to be adjusted on your records because your cash balance is affected.

what are limitations in internal control systems?

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

Pcards:

- are used by employees to purchase business-related items - are often used in place of a petty cash fund

at the end of the day, the cashiers rung up sales of $5,000 and counted on the cash count sheets and deposited $5,100, the accounting department would make a journal entry for the day's sales that includes _________.

- debit to cash for $5,100 - credit to sales revenue of $5,000 - credit to cash overage of $100

good internal controls over cash requires cashiers to __________

- give a cash register receipt to every customer - restrict access to the cash register

SOX reduces the opportunities for fraud by requiring publicly-traded companies to________.

- have external auditors evaluate the companies' internal controls - establish an audit committee of independent directions - evaluate and report on its internal controls

3 component of the fraud triangle:

- incentive - opportunity - rationalization

incentives for committing fraud in order to satisfy personal greed include:

- increasing personal wealth - getting a bigger paycheck

how do banks help businesses control cash?

- independently verifying - documenting procedures - restricting access to cash

which of these are cash equivalents?

- investments within 3 months to maturity - money market funds

each cash drawer is assigned to only one employee in a supermarket. This is an example of the internal control principle of:

establishing responsibility

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

opportunity

what is subtracted from the bank balance on a bank reconciliation?

outstanding checks

after approval of a purchase had been obtained, the purchasing agent completes a prenumbered ________ that identifies the supplier, the delivery location, and the approved quantity and cost.

purchase order

the purchasing system begins with an authorized employee completing a manual or electronic _______ which is then reviewed and approved by a supplier before an order is placed with a supplier.

purchase requisition


Kaugnay na mga set ng pag-aaral

Chapter 4 Questions: Fluid, Electrolyte, and Acid-Base Balance Problems

View Set

Estructura y función celular en bacterias y arqueas

View Set

Ch, 20 Nursing Care of Patients w/ HIV Disease and AIDs

View Set

BUS law ch. 12 Contracts (cengage hw)

View Set

Chapter 2: Business Ethics& Social Responsibility

View Set