Chapter 5 ACC Learnsmart: Fraud, Internal Control, and Cash

An advantage of direct deposits is they ______.

are convenient and efficient

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

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

True of False: Internal controls prevent and detect all errors and fraud.

False internal controls can fail because of human error or fraud

Accountants are spending more of their time on executing the basic steps of a voucher system than has been spent in the past.

False many of the steps in the voucher system are performed using robotic process automation, so less, not more, human involvement is required

Instead of a petty cash system, many companies use _____ which allow employees to purchase business-related items.

Pcards

Good internal control for cash receipts would include having the _____ compare the record of cash sales per the register with the count sheets and bank deposit slip returned by the bank.

accounting department

Anonymous ______ allow anyone to tip off independent auditors about suspected fraud.

hotline

A(n) ______ is used for paying employees whereby the company has the bank transfer the exact amount of payroll into a special payroll account. After all employees have been paid, the balance in the special payroll account should be zero and, if not, indicates an error has occurred.

imprest system

_______ of duties is essential for safeguarding assets. The person who has custody of an asset should not also account for the asset. A person who performs both duties can steal the asset and hide the theft by making a bogus entry in the accounting records.

segregation

Which of the following is an example of weak internal controls?

the mail-room clerk records daily cash receipts in the journal

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

transit and bank

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

customers check rejected by the bank as NSF EFT received from customers discovered on the bank statement Interest Revenue

When the cash count sheets for the day equal $10100 and the cash register reports 10200, the journal entry to record the sales will include a _____.

debit to cash shortage

A(n) _____ system is a process for approving and documenting all purchases and payments made on account.

voucher

A company has a $8000 cash balance per its books. The bank statement has a balance of $8450. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, EFTs of $1000 were received from customers, a $200 NSF check from a customer, and a $50 bank service charge. Given the following reconciling items, the up to date cash balance equals _______.

$8750

A company has a $10000 cash balance per its books. The bank statement has a balance of 9580. The bank reconciliation included 800 of deposits in transits, 500 of checks outstanding, a 100 NSF check from a customer, and a 20 bank service charge. Given the following reconciling items, the up-to-date cash balance equals_____?

$9880

The company needs to record the reconciling items that are on the _____ side of the bank reconciliation.

book

To segregate duties involving cash receipts, specific responsibilities are assigned to various employees. Put the following steps in the correct chronological order.

cashiers are responsible for collecting cash and issuing a receipt at the point of sale a supervisor is responsible for collecting the cash at the end of each cashiers shift members of the accounting department are responsible for ensuring that cash sales are properly recorded.

When a check is presented to a bank for payment and the amount is deducted from the payers account, the check is said to have _____ the bank.

cleared

What are reasons internal controls can never completely prevent and detect errors and fraud?

collusion human error costs exceed benefits

Which of the following are 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 credited your account for a deposit that should have been deposited into another customer's bank account, not your. This bank error should be a(n)______ on a bank reconciliation.

deduction from the bank balance

Which of the following reconciling items dow not require a journal entry?

deposit in transit

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

deposits in transit outstanding checks

An example of an EFT is _____.

direct deposit of employee paychecks

Assigning sequential numbers to cash sales, so that the accounting stage can ensure that every sale has been recorded is required by the internal control principle of ____.

documenting procedures

A goal of the Sarbanes-Oxley Act is improving corporations' internal controls. Which of these may accomplish this goal?

external auditors must test the effectiveness of the company internal controls an audit committee of independent directors oversees financial matters of the company Marketing managers must determine whether the marketing team is submitting accurate sales and expense reports

The benefits of internal control procedures are that they_____.

improve the efficiency and effectiveness of operations enhance the reliability of accounting information protect against theft of assets

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

The principles underlying the internal control system include___.

independently verify segregating duties establishing responsibility documenting procedures restricting access

How do banks help businesses control cash?

independently verifying restricting access to cash documenting procedures

If a bank reconciliation included a deposit in transit of $670, the company journal entry for this reconciling item would include_____.

nothing, because the deposit has already been recorded

Which of the following is subtracted from the bank balance on a bank reconciliation?

outstanding checks

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

A bank _____ 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.

reconciliation

Good internal control for cash receipts to be performed by the accounting department should include ______.

recording the cash receipts in the journal comparing cash register sales with the cash count sheets and bank deposit slip

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.

request good or services by submitting a purchase requisition prepare a purchase order after suppliers and prices have been approved prepare a receiving report prepare a supplier invoice and prepare the journal entry

The _____ principle of internal control requires the use of firewalls and passwords.

restrict access

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

robotic