Smartbook LO4-1 thur LO4-8
In a bank reconciliation, a deposit outstanding is
added to the bank balance
The Sarbanes-Oxley Act applies to
companies that are required to file with the SEC.
The key provisions of the Sarbanes-Oxley Act include
restricting activities of auditors to prevent conflicts of interest, requiring documentation and assessing effectiveness of internal controls, requiring that corporate executives certify financial statements.
In a bank reconciliation, an outstanding check is ______.
deducted from the bank balance
A(n)_______ difference in cash occurs when a company records a transaction either before or after the bank records the same transaction.
timing
The framework for designing an internal control system is provided by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called
Fraud
The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the
Sarbanes-Oxley Act.
The asset that is most easily stolen and susceptible to fraud is _______.
cash
The asset that is most susceptible to employee fraud is
cash
Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called
checks outstanding
he 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
Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are
deposits outstanding.
Which of the following are preventive controls?
physical controls, separation of duties
Separation of duties and E-commerce controls are examples of ______ controls.
preventive
When a person intentionally deceives another person or company for personal gain, this is referred to as
Fraud
Who has final responsibility for internal controls?
Management
What would cause a bank statement not to agree with the cash balance in the accounting records?
The bank made an error in recording a deposit made by the company, deposits outstanding that have been recorded on the company's records, but not on the bank's, the bank paid interest that the company has not recorded, the company made an error in recording a deposit.
Two types of control activities are
preventive and detective controls.
Internal control consists of plans to
provide accurate and reliable accounting information, safeguard company assets.
A bank statement may not agree with the amount of cash recorded by the company in the cash account because of _____ differences and errors
timing
A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to
timing differences and errors.
Which of the following are provisions included in the Sarbanes-Oxley Act?
Require auditors to retain work papers for 7 years, require that audit firms are hired by the audit committee of the board of directors.
The framework for designing an internal control system is provided by the
Securities and Exchange Commission Act of 1934.
Who is responsible for providing an opinion on management's assessment of internal control?
The company's auditors
Lindell sells $100 of goods to a customer. The customer pays with a personal check. Recording this transaction will include a
debit to cash
A non-sufficient funds check requiring an adjustment to the cash balance was written:
to the company preparing the bank reconciliation
True or false: The entry for a sale to customers is different depending on whether the customer pays with cash or a check.
False
What is the primary purpose of a bank reconciliation?
To ensure the bank balance per reconciliation is equal to the company balance per reconciliation
In a bank reconciliation, interest revenue earned on a company's bank account is:
added to the company's cash balance
Largo Corp. discovered $2,000 for an NSF check in its bank reconciliation. When the cash account is updated for items that affect the company's cash balance, the entry will include
credit Cash, $2,000.
The bank will show a customer's withdrawal as a _____.
debit, because a withdrawal decreases its liability from the bank's point of view
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for
designing an internal control system
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for
designing fraud-proof accounting system.
he Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for
designing fraud-proof accounting system.
The two types of control procedures are preventive and
detective
A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as
internal controls
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.
