LS 5: Fraud, Internal Control, and Cash

when the cash count sheets for the day equal $10,100 and the cash register reports $10,200, the journal entry to record the sales will include a _____

debit to Cash Shortage

a _____ deposit is initiated by an EFT instructing a bank to transfer pay due to 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

the definition of EFT is _____

electronic funds transfer

a(n) _____ controls the amount paid to others by limiting the total amount of money available for making payments

imprest system

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

mail clerk

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

overage

_____ 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

physically locking up assets and electronically securing access to other assets and info is required by the internal control process of _____

restricting access

the services provided by a bank help businesses control cash by _____ - restricting access and preparing bank reconciliation - restricting access and providing documentation and independent verification - restricting access, providing impress and petty cash systems, and independent verification

restricting access and providing documentation and independent verification

_____ 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

true or false: an internal control goal for cash receipts is to ensure that the business documents the correct amount of cash received and safely deposits the cash into its bank account

true because cash is valuable, portable, and owned by the person who possesses it, special care must be taken to safeguard all cash receipts

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

voucher

a common principle of internal control is to _____ - assign each task to only one employee - have cashiers verify that the cash in their register drawer reconciles with the accounting records - combine activities to ensure efficiency

assign each task to only one employee

which of the following are limitations in internal control systems? - management is unable to bond employees and make them take vacations - it's too difficult for the accountants to physically count all assets and ensure the assets are included in the financial records - 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

- 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

good internal controls for cash receipts that should be performed by a supervisor include _____ - completing bank deposits - comparing cash in registers with cash count sheets - recording the cash receipts in the journal - giving a cash register receipt to every customer - restricting access to cash by locking it up

- completing bank deposits - comparing cash in registers with cash count sheets - restricting access to cash by locking it up

additional mechanisms of internal control include ______ - a sound marketing plan - mandatory vacations - a slow computer network - bonding - anonymous hotlines

- mandatory vacations - anonymous hotlines - bonding

which of the following duties should NOT be the responsibility of an employee who has access to cash? - prepare cash count sheets - record cash collected in the journal - perform bank reconciliations - issue receipts at the point of sale - scan items sold

- record cash collected in the journal - perform bank reconciliations

match each of the five principles of internal control with its description - segregate duties - establish responsibilities - restrict access - document procedures - independently verify

- segregate duties: don't make one employee responsible for all parts of a process - establish responsibilities: assign each task to only one employee in order to allow one to determine who is at fault for an error or theft - restrict access: do not provide access to assets or info unless it's needed to fulfill the assigned task - document procedures: prepare documents to show activities that have occurred - independently verify: check others' work

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

cash count sheet

place the order of the steps in the document and controlling purchases in a voucher system in order - prepare a supplier invoice and prepare the journal entry - prepare a purchase order after suppliers and prices have been approved - prepare a receiving report - request goods or services by submitting a purchase requisition

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

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