Accy 2036 (chapter 5 info) Exam 2

Pcards ____

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

NSF checks are the same as ________

-bounced checks -non-sufficient funds checks

Goof internal control for checks received through the mail would include the mail clerk ____

-giving checks and money orders to the supervisor who makes the bank deposit -sending the cash receipts list and the customers' remittance advice to the accounting department

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 -restricting access to cash -documenting procedures

true or false: accountants are spending more of their time executing the basic steps of a voucher system than has been spent in the past

False

Which controls activities would be performed to meet the independently verify principle of internal control?

comparing the company's accounting information to information kept by an independent third party

Internal control system

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

a cash ______ occurs when the total of the cash receipts for petty cash expenditures plus the remaining cash is less than the original amount in the petty cash box

shortage

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

NSF checks from customers should be a(n) ________ on a bank reconciliation

subtraction from the book balance

Establish Responsibility

Two employees ("cash and collection clerks") are responsible for collecting cash from the lockers. Based on instructions from the office manager, on clerk collects cash from specific locations on the west side of the city and the other collects from specific locations on the east side

Employee ______ is often grouped into 3 categories: corruption, asset misappropriation, financial statement fraud

fraud

At the end of the day, a supervisor compares the cash in the register with the cash count sheet, a copy of which is sent to the accounting department. Which internal control principle is most evident in this procedure?

independently verifying the information

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

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

not change your records

______ is one of the 3 components of the fraud triangle that related to taking advantage of weak internal controls

opportunity

A process for approving and documenting all purchases and payments on account is referred to as a(n)....

voucher system

What are the five principles of internal control

1. segregate duties -- do not make one employee responsible for all parts of a process 2. establish responsibilities -- assign each task to only one employee in order to allow one to determine who is a fault for an error or theft 3. restrict access -- do not provide access to assets or information unless it is needed to fulfill the assigned task 4. document procedures -- prepare documents to show activities that have occurred 5. independent verify -- check others' work

Which of the following statements about internal control is correct? A) It promotes efficient and effective operations B) it eliminates the theft of assets C) it results in completely reliable accounting information

A) It promotes efficient and effective operations

The objectives of a company's system of internal control include which of the following?

Adhering to laws and regulations

What is the term used to describe the attitude people in the organization hold regarding internal control?

Control environment

Comparing the cash in the register with the cash count sheet is require by the internal control principle of:

Independently verifying

Cashiers at a supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

Segregate duties

Independently verify

The supervisor sends the stamped bank deposit slip and daily cash summary to the accountant, who compares them before preparing a journal entry debiting Cash and crediting Locker Rental Revenue

Segregate duties

The supervisor, not the cash collection clerks, takes the cash to the bank for deposit

Which of the following is NOT one of the documents used in a voucher system? a) cash count sheet b) purchase order c) purchase requisition d) receiving report

a) cash count sheet

Which element is part of the fraud triangle? a) incentive b) misappropriation c) corruption d) sustainability

a) incentive

Which of the following is NOT a significant objective of the Sarbanes-Oxley (SOX) Act? a. conceal fraud b. reduce opportunities for fraud c. encourage good character d. counteract incentives for fraud

a. conceal fraud

Which of the following should not be the responsibility of an employee who has access to cash? a. record cash collected in the journal b. scan items sold c. issue receipts at the point of sale d. prepare cash count sheets e. perform bank reconciliations

a. record cash collected in the journal e. perform bank reconciliations

Deposits in transit are _____ on a bank reconciliation

added to the bank balance

Deposits in transit occur when you make a deposit _______

after the bank's normal business hours

An advantage of direct deposits is they _____

are convenient and efficient

An example of the internal control principle of establishing responsibility is:

assigning each cash drawer to only one employee establishing responsibility

segregation of duties

assigning responsibilities for record keeping to employees who do not have access to the assets for which they are accounting

Which element is NOT part of the fraud triangle? a) rationalization b) opportunity c) sustainability d) incentive

c) sustainability

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

debit, because a withdrawal decreases its liabilities from the bank's POV

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

deduction from the bank balance

purchase order

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

Purchase requisiton

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

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

establishing responsibility

Among the requirements of SOX is those who willfully misrepresent financial results _____

face stiff fines and possible jail sentence

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

hotlines

The procedure of bank reconciliation is an example of which principle of internal control?

independent verification

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

interest deposited

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

who should be responsible for stamping checks received in the mail with "for deposit only"?

mail clerk

A difference between an imprest payroll account and petty cash is petty cash is ____

not held at the bank

If a bank reconciliation included a deposit in transit of $670, the company's journal entry for this reconciling item would include _______

nothing, because the deposit has already been recorded

To avoid duplicate payment, the voucher should be marked "_________" as the final step in the voucher system

paid

a _____ cash system involves putting money into a fund, paying money out to reimburse others and putting money back into to replenish the fund

petty

The entry to record the establishment of a petty cash fund is a debit to _____ and a credit to _______

petty cash; cash

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered _______ that identifies the supplier, the delivery location, and the approved quantity and cost

purchase order

How does the customer typically explain the purpose of a payment that is sent in the mail to one of its suppliers?

remittance advice

The entry that debits carious expenses and credits Cash is recording the ______

replenishing of petty cash

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

the services provided by a bank help business control cash by ____

restricting access and providing documentation and independent verification

A weak system of internal controls provides ...

the opportunity to commit fraud

Petty cash payments are recorded in the accounting system's ledger when _____

the petty cash fund needs to be replenished

voucher system

the process for approving and documenting all purchases and payments on account

Restrict access

the supervisor places the cash in a locked cashbox until it is taken to the bank for deposit

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

transit, bank

Which of the following are true regarding a bank statement?

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

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

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

Which of the following would be added to the ending cash balance per bank when performing a bank reconciliation? A) Deposits in transit B) Electronic fund transfers C) Service charges D) NSF checks

A) deposits in transit

Which of the following poses a high risk of theft because of its high volume and ease of portability?

cash

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

cash count sheet

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 records

supplier invoice

The bank statement included a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation?

it would be deducted from the book balance

violating loan covenants could lead to ____

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

if the cash collected is less than the amount per the cash register, then _____

cash shortage is debited

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

cleared

reconciling

comparing two sets of records

Match the following control components of the framework used when analyzing internal control systems with the appropriate description

control environment: refers to the attitude of the people in the organization and their commitment to integrity risk assessment: evaluate potential for fraud control activities :work responsibilities and duties completed to reduce risks to an acceptable level monitoring activities: evaluating the internal control system to see if working as intended

A weak system of internal ______ can lead to fraudulent financial statements. These procedures and policies help ensure that information entered into the accounting system and reported in the financial statements is accurate and complete

controls

imprest system

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

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

outstanding checks

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

purchase requisition

Janet feels that she is underpaid and is entitled to the inventory that she steals from the company's warehouse. What is the term used to describe this fraud triangle factor?

rationalization

This document indicated 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

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

robotic

Cashiers at the supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

segregate duties

Service charges are ______ of a bank reconciliation

subtracted from the book's balance

A ________________ system involves the processing of purchases and payments made on account.

voucher

Document procedures

when each cash collection clerk returns with the cash, a supervisor counts the cash and prepares a cash count sheet The supervisor summarizes the cash count sheets in a prenumbered daily cash summary and files the prenumbered cash count sheets by date The supervisor prepares a duplicate deposit slip, which the bank stamps after the deposit is made to indicate the date and amount of the deposit

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

Which of the following 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?

-electric funds transfer -service charges -interest income

The quality of financial reporting for publicly traded companies is improved through _______

-evaluating and reporting on the effectiveness of internal controls -obtaining an external audit

What are cash equivalents?

-investments within 3 months to maturity -money market funds

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

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

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

Fraudsters may rationalize their actions ________

-through a feeling of personal entitlement -by convincing themselves their actions are justified -are legitimate since they are underpaid

Match the principle of internal control with the supervisor's internal control responsibility described

1) independent verification -- The supervisor reconciles the cashier's count sheet to the cash collected. 2) restrict access -- The supervisor is responsible is responsible for keeping the cash safe and getting the cash to the bank. 3) document procedures -- The supervisor prepares a deposit slip 4) segregation of duties -- The supervisor forwards the verified deposit slip to the accounting record to record the cash receipts.

What are the 3 types of Employee Fraud?

1. Corruption-- missing ones position for inappropriate personal gain 2. Asset misappropriation -- theft/embezzlement. cash is usually the target, but other assets can be misappropriated 3. Financial statement fraud -- misreporting amounts in the financial statement usually to portray more favorable financial results than what actually exist

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