ACC 212 Ch 5

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

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

Outstanding checks have already been _________.

deducted from your cash balance per your books but not the bank balance

Outstanding checks written by the company should be a ________ on the company's bank reconciliation.

deduction from the bank balance

The bank credited your account for a deposit made by another bank customer. This bank error should be a(n) _____ on a bank reconciliation

deduction from the bank balance

A ________ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts.

direct

An example of an EFT is

direct deposit of employees paychecks

Among the new requirements of SOX is those who willfully misrepresent financial results _____________.

face stiff fines and possible jail sentence

Employee ________ is often grouped into three categories, Corruption, asset misappropriation, financial statement fraud.

fraud

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

imprest

Activity of establish responsibility

just one employee receives cash

Reporting

objective is to produce reliable and timely accounting information

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 or 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 in registers with cash count sheets

________ 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

_________ 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 bank

Mandatory _______ is a policy that is established to make it difficult for fraudsters to cover up their theft while they are away.

vacation

A company has $10,000 cash balance per its books. The bank statement has a balance of $9,580. 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

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

- Customer checks that bounced (NSF) - Deposits were made at the end of the bank statement date in an ATM - Not all checks written cleared the bank

How can a company enhance its document procedures?

-Assign sequential numbers to documents -Check to ensure that each document number corresponds to one and only one accounting entry -require digital and paper documents for all business activities.

Which of the following are included in the cash amount that is reported in the current assets section of a company's balance sheet?

-Cash deposited with banks -Cash equivalents -Petty cash on hand

Which of the following are documented on a bank statement that is provided to a company?

-Checks written by the company that have cleared the bank -Deposits made by the business -Interest earned on the account balance -service charges

Which part of the Sarbanes- oxley (SOX) act may encourage employees to be honest:

-Code of ethics -Anonymous tip line -Whistle- blower protection

A company deposits and stores its cash in a bank. Which internal control principles are evident in this procedure?

-Documents Procedure -Independently verifying the information -Restricting Access

Which of the following are the reasons that a company's records can differ from the bank's records?

-The bank has recorded items the company doesn't know about until the bank statement is examined. -The company has recorded items the bank doesn't know about at the time it prepares the statement of account

Banks provide important controls surrounding a company's cash. These include what?

-banks provide statements that are used for independent verification -banks restrict access -banks provide documentation

Violating loan covenants could lead to _______.

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

Which of the following are common principles of internal control?

-establish responsibility -segregate duties -restrict access

The quality of financial reporting for publiciy traded companies is improved through ________.

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

Which of the following explain why internal controls can never completely prevent and detect errors and frauds?

-fraud -human error -employees may override controls -employees may collude to get around controls

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

-human error -costs exceed benefits -collusion

The Sarbanes- Oxley (SOX) Act provides increased regulations for _________.

-internal controls -auditors -corporate executives

Some managers commit fraud because they are under great pressure to report a high net income to meet ______.

-loan covenant requirements -financial analysts' earnings forecasts -shareholders' expectations

the three main components of the fraud triangle are:

1. opportunity 2. rationalization 3. incentive

NSF Checks from customers should be subtracted from the ____ balance on a bank reconciliation

book

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

Which of the following are categories of employee fraud?

Asset misappropriation corruption financial statement fraud

Describe segregation of duties?

Assigning responsibilities for recordkeeping to employees who do not have access to the assets for which they are accounting

If the cash that is collected is greater than the amount per the cash register, then _______

Cash overage is credited

If the cash that is collected is less than the amount per the cash register, then _________.

Cash shortage is debited

What types of companies are required to comply with the requirements of the Sarbanes-Oxley Act (SOX)?

Companies that trade on the U.S. stock exchanges

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

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

Control environment

A check that you have written has cleared the bank when.....

Funds have been withdrawn from your bank account to cover the check

Which of the following are the factors that exist when fraud occurs?

Incentive Opportunity Rationalization

Potboiler Company has a lending agreement with its bank that states that the company must maintain stockholders' equity of at least $500,000. The company will be required to repay its loan balance on demand if that requirement is not met. What term is used to describe this type of requirement in a lending agreement?

Loan covenant

Risk Abatement

Not an objective

Operations

Objective is to ensure the efficient and effective completion of work and the protection of assets.

Compliance

Objective is to focus on adhering to laws and regulations

A weak system of internal controls provides the _______ to commit fraud.

Opportunity

Which of the following is not an example of a company implementing controls to restrict access?

Placing security cameras in a server room

Janet Cartwright 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

"NSF" checks stands for "non- ________- funds"

Sufficient

Document procedures

The accounting department compares the cashiers count sheet to the cash register and to the bank deposit slip

Independent verification

The accounting department compares the cashiers count sheet to the cash register and to the bank deposit slip

Segregation of Duties

The accounting department does not have access to the cash

Document procedures

The accounting department records a journal entry for the cash receipts

A ______ is a collection of documents prepared in the process of approving, processing and documenting all purchases and payments made on account.

Voucher

Activity of independently verifies

a company manager compares the cash count sheets with the bank deposit slip

Activity of segregate duties

a person different from whom receives the cash makes the deposit in the bank

in a bank reconciliation, the electronic funds transfer (EFT) received by the bank from a customers note receivable owed to the company is ________

added to the book balance

Activity of Document procedures

cash receipts are summarized and their total is calculated