Accounting Chapter 5

controls the amount paid to others by limiting the total amount of money available for making payments

imprest system

the _______ system consists of actions taken to promote efficient and effective operations, protect assets, enhance accounting information, and adhere to laws and regulations.

internal control

checks that have been written but have not yet cleared the bank

outstanding checks

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

-counteracting incentives -encouraging honesty in employees -reducing opportunities

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

-customer's check rejected by the bank as NSF -interest revenue -EFT received from a customer discovered on the bank statement -service fee charge

What are the components of the fraud triangle?

-opportunity -rationalization -incentive

Banks provide important controls surrounding a company's cash, including:

-restricting access -providing documentation -providing statements that are used for independent verification

The principles underlying the internal control system:

Establish responsibility Segregate Duties Restrict Access Document Procedures Independent Verification

important control as it provides independent verification of all cash transactions the bank has processed for the company

bank reconciliation

used to document the amount of cash collected and available for deposit at the bank

cash count sheet

the 3 categories of employee fraud

corruption, asset misappropriation, financial statement fraud

petty cash payments are recorded in the accounting system ledger when

the petty cash fund needs to be replenished

a process for approving and documenting all purchases and payments made on account

voucher system