Accounting Chapter 4

The asset that is most easily stolen and susceptible to fraud is_______

Cash

Which of the following led to the passage of the Sarbanes-Oxley Act of 2002?

High profile accounting scandals during the early 2000s

When adjusting the bank balance in a bank reconciliation, which item must be subtracted from the bank balance?

Outstanding checks

Which of the following are detective controls?

Performance reviews Reconciliations Audits

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

Which of the following will cause differences between the bank statement balance and the accounting balance for cash?

Timing differences and errors

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.

When adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance?

deposits outstanding

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are

deposits outstanding.

One of the most important internal controls for cash is the bank

reconciliation

A bank reconciliation reconciles the bank statement with the company's

Cash account in the balance sheet

The bank will show a customer's deposit on bank statements as a ______.

Credit, bc a withdrawl decreases

True or false: The entry for a sale to customers is different depending on whether the customer pays with cash or a check.

False

An intentional error by an employee that results in theft is referred to as a ______.

Fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as

Fraud

Published financial statements may be incorrect because of (Select all that apply.)

Fraud & Errors

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as

Internal

A periodic performance review is an example of a(n)______ control

Internal or detective

Who has final responsibility for internal controls?

Management

Which of the following are errors in accounting for cash?

Recording a cash collection of $4,000 but depositing $3,000 into the bank. The bank processing a check for $210 as $120. Recording a check for $168 for $186 in the cash account.

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.

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's: (Select all that apply.)

Statement of cash flows & balance sheet

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for

designing an internal control system.

The most common source of occupational fraud is:

misuse of company resources

The two most common sources of occupational fraud are:

misuse of company resources financial statement manipulation

Which of the following are common controls over cash receipts? (Select all that apply.)

- having two different employees take custody of the checks and make the deposit - opening mail daily and making a detailed list of checks received

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

-Deposits outstanding that have been recorded on the company's records, but not on the bank's. -The bank made an error in recording a deposit made by the company. -The company made an error in recording a deposit. -The bank paid interest that the company has not recorded.

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

-Opening the mail and deposit of checks in the bank -Depositing checks into the bank and recording receipts in the accounting records

List the steps for a bank reconciliation in the correct order. (Drag the items to put them in the proper order with the first step on top.)

1. Adjust bank's balance 2.Adjust the company's balance 3. Update the company's cash by recording items in the previous step.

Preparation of a bank_________ helps maintain control of cash accounts.

Reconciliation

High profile accounting scandals in the early 2000s prompted the passage of the:

Sarbanes-Oxley Act

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

Sarbanes-Oxley Act.

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? (Select all that apply.)

Service charges Charges for NSF checks

The ending balance in cash is reported in which financial statement(s)?

The balance sheet and statement of cash flows

The amount of cash in the balance sheet reflects the

cash in the balance sheet ending date

In a bank reconciliation, an outstanding check is ______.

deducted from the bank balance

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and

errors

The two reasons why companies may issue incorrect financial statements are fraud and

errors

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n)

petty cash

Two types of control activities are

preventive and detective controls

The key provisions of the Sarbanes-Oxley Act include

restricting activities of auditors to prevent conflicts of interest. requiring that corporate executives certify financial statements. requiring documentation and assessing effectiveness of internal controls.

Which of the following steps are necessary to reconcile the bank balance and the cash account balance.

-Adjust the company's cash balance -Adjust bank's cash balance -Record items that reconcile the company's cash balance

In a bank reconciliation, which of the following will require a journal entry by the company?

Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

Which of the following items are included in cash?

Balance in checking accounts Currency and coins Checks from customers

Which of the following items will require a journal entry following a bank reconciliation? (Select all that apply.)

Notes collected by the bank NSF checks

Separation of duties, physical, proper authorization, employee mangement and E-commerce controls are examples of ______ controls.

Preventative

Who is responsible for providing an opinion on management's assessment of internal control?

The company's auditors

What is the primary purpose of a bank reconciliation?

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation

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

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

When a company finds out that an NSF check was written to the company, the company must ______ the balance in the cash account.

decrease

Internal control consists of plans to (Select all that apply.)

safeguard company assets & provide accurate and reliable accounting information.