Deck 5: Sarbanes-Oxley, internal Control, and Cash

Question 1

If a business has several bank accounts,it will have a separate record for each of them.

Answer 1

True

Question 2

Information and communication are essential elements of an organization's internal control.

Answer 2

True

Question 3

The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.

Answer 3

True

Question 4

A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid.

Question 5

A voucher is a written authorization to make a cash payment.

Question 6

The internal control environment is enhanced by the hiring and retention of competent,honest employees.

Question 7

There are only two internal control objectives: to ensure accurate financial reports,and to ensure compliance with applicable laws.

Question 8

Money orders are considered cash.

Question 9

A voucher system is an example of an internal control procedure over cash receipts.

Question 10

The Sarbanes-Oxley Act requires companies and their independent accountants to report on the effectiveness of the company's internal controls.

Question 11

The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording transactions and preparing financial statements.

Question 12

A voucher system is an example of an internal control procedure over cash payments.

Question 13

Separating the responsibilities for purchasing,receiving,and paying for equipment is an example of the control procedure: separating operations,custody of assets,and accounting.

Question 14

For a strong internal control system over cash,it is important to have the duties related to cash receipts and cash payments divided among different employees.

Question 15

A voucher is a form where pertinent data about a liability and the particulars of its payment are recorded.

Question 16

In a computerized system,paid vouchers are transferred to a paid voucher file.

Question 17

Adding a review of operations by an internal audit staff weakens internal control.

Question 18

A customer's check received in settlement of an account receivable is considered cash.

Question 19

All organizations face risks,and the assessment of these risks is necessary so that the objectives of internal control can be achieved.

Question 20

Employee fraud is the intentional act of deceiving an employer for personal gain.

Question 21

A voucher is the notification accompanying the check issued to a creditor that indicates the specific invoice being paid.

Question 22

A credit memorandum received with a bank statement means the company's bank account has been increased.

Question 23

The bank section begins with the cash balance according to the bank statement and ends with the adjusted balance.

Question 24

Depositing all cash,checks,etc.in a bank and paying with checks is an internal control procedure over cash.

Question 25

Bank customers are considered owners of the bank,so the bank shows their accounts as an asset on the bank's records.

Question 26

The amount of the "adjusted balance" appearing on a bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date after all adjusting entries have been entered.

Question 27

A bank reconciliation is an important part of the system of internal controls.

Question 28

The depositor reconciles the bank's statement to the depositor's records.

Question 29

In preparing a bank reconciliation,the amount of deposits in transit is deducted from the cash balance per books.

Question 30

The bank reconciles its statement to the depositor's records.

Question 31

For efficiency of operations and better control over cash,a company should maintain only one bank account.

Question 32

All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.

Question 33

Outstanding checks are checks that have been issued but have not cleared by the bank.

Question 34

The bank informs the depositor of bank service charges by including a credit memorandum with an monthly bank statement.

Question 35

In preparing a bank reconciliation,the amount of deposits in transit is deducted from the cash balance per bank.

Question 36

Internal control is enhanced by combining the control of a transaction with the record-keeping function.

Question 37

In preparing a bank reconciliation,the amount of a canceled check omitted from the depositor's records is deducted from the cash balance per books.

Question 38

The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a bank reconciliation.

Question 39

A check for $456 was erroneously charged by the bank as $654.In order for the bank reconciliation to balance,you must subtract $198 from the bank statement balance.

Question 40

In preparing a bank reconciliation,the amount indicated by a debit memorandum for bank service charges is added to the cash balance per books.

Question 41

Money market funds,commercial paper,and U.S.Treasury Bills are examples of cash equivalents.

Question 42

A debit memorandum from the bank indicates that the bank has deducted an amount from the depositor's account.

Question 43

Risks can be analyzed to:

A)assess their likelihood of occurring.
B)separate responsibilities for related operations.
C)observe employees' behavior and the accounting system.
D)ensure compliance with reporting,legal,and regulatory requirements.

Question 44

In preparing a bank reconciliation,the amount indicated by a debit memorandum for bank service charges is deducted from the cash balance per bank.

Question 45

A business that requires all cash payments be made by check cannot use a petty cash system.

Question 46

When the petty cash fund is replenished,the petty cash account is adjusted for the total of all expenditures made since the fund was last replenished.

Question 47

Which of the following reflects a weak internal control system?

A)All employees are well supervised.
B)A single employee is responsible for comparing a receiving report to an invoice.
C)All employees must take their vacations.
D)A single employee is responsible for the collecting and recording of cash.

Question 48

Minimum cash balance maintained in the bank account is called line of credit.

Question 49

An element of internal control is:

A)generally accepted accounting principles.
B)control procedures.
C)special-purpose fund.
D)electronic funds transfer.

Question 50

In preparing a bank reconciliation,the amount of outstanding checks is deducted from the cash balance per books.

Question 51

The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to:

A)report on the effectiveness of the company's internal controls.
B)report on any fraud and theft detected in the company.
C)report on the state of the economy and likelihood of fraud.
D)report on the financial activities of the company.

Question 52

,which constitute one of the most important elements of internal control,include separating operations,custody of assets,and accounting.

A)Risk assessment
B)Control Procedures
C)Control environment
D)Monitoring

Question 53

Internal controls are important because they:

A)deter fraud and prevent misleading financial statements.
B)eliminate fraud.
C)ensure that the company maintains a compensating balance.
D)guarantee accurate financial statements.

Question 54

The purpose of the Sarbanes-Oxley Act of 2002 is to:

A)restore public confidence and trust in the financial statements of publicly held companies.
B)require all companies to prepare financial statements.
C)protect companies from demands of investors,stockholders,and creditors.
D)do all of these.

Question 55

An element of internal control is:

A)business.
B)management.
C)monitoring.
D)personnel policies.

Question 56

Which of the following is a factor influencing about internal control environment?

A)management's operating style.
B)organizational behavior.
C)mandatory vacations.
D)security measures.

Question 57

In preparing a bank reconciliation,the amount indicated by a credit memorandum for a note receivable collected by the bank is added to the cash balance per books.

Question 58

The framework that has become widely accepted as the standard by which companies design,analyze,and evaluate internal controls is the:

A)Internal Control - Integrated Framework by the Committee of Sponsoring Organizations.
B)Internal Control - Integrated Framework by the Congress of Special Offerings.
C)Internal Control Localized Structure by the Committee of Sponsoring Organizations.
D)Internal Control Localized Structure by the Congress of Special Offerings.

Question 59

Internal control consist of policies and procedures that .

A)involve cost-benefit considerations
B)deal with human element of controls such as,fatigue,carelessness,etc.
C)ensure public relations
D)ensure the accuracy of business information

Question 60

An element of internal control is:

A)risk assessment.
B)journals.
C)subsidiary ledgers.
D)controlling accounts.

Question 61

The bank reconciliation:

A)should be prepared by an employee who records cash transactions.
B)is part of the internal control system.
C)is for information purposes only.
D)is sent to the bank for verification.

Question 62

Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

A)Control environment
B)Risk assessment
C)Control procedures
D)Monitoring

Question 63

Receipts from cash sales of $7,500 were recorded incorrectly by the depositor as $5,700.What adjustment is required in the bank's accounts?

A)Decrease Sales; decrease Cash
B)Increase Cash; decrease Accounts Receivable
C)Increase Cash; increase Sales
D)No adjustment needed

Question 64

A check drawn by a depositor for $915 in payment of a liability was recorded in the depositor's book as $195.What adjustment is required in the depositor's accounts?

A)Decrease Accounts Payable; decrease Cash
B)Increase Cash; decrease Accounts Receivable
C)Increase Cash; increase Accounts Payable
D)Increase Accounts Receivable; decrease Cash

Question 65

When a firm uses internal auditors,it is adhering to which of the following internal control elements?

A)Risk assessment
B)Control procedures
C)Monitoring
D)Information and communication

Question 66

The amount of the outstanding checks is included on the bank reconciliation as a(n):

A)deduction from the cash balance per books.
B)addition to the cash balance per bank.
C)deduction from the cash balance per bank.
D)addition to the cash balance per books.

Question 67

A voucher:

A)is received from customers to explain the purpose of a payment.
B)is normally prepared in the Accounting Department.
C)system is used to control cash receipts.
D)system is an internal control procedure to verify that the assets in the records are the ones the company owns.

Question 68

Which of the following of internal control deals with hiring,training,evaluation,compensation,and promotion of employees?

A)Monitoring
B)Control environment
C)Risk assessment
D)Control procedures

Question 69

On the bank's accounting records,customers' accounts are normally shown as a(n):

A)revenue.
B)liability.
C)asset.
D)expenses.

Question 70

Receipts from cash sales of $5,700 were recorded incorrectly by the depositor as $7,500.The $1,800 difference would be included on the bank reconciliation as a(n):

A)addition to the cash balance per books.
B)addition to the cash balance per bank.
C)deduction from the cash balance per bank.
D)deduction from the cash balance per books.

Question 71

Which of the following is considered as cash?

A)Commercial papers
B)Bonds
C)Checks
D)Equities

Question 72

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer.What adjustment is required in the depositor's accounts?

A)Increase Notes Receivable; decrease Cash
B)Increase Cash; increase Miscellaneous Income
C)Increase Cash; decrease Notes Receivable
D)Increase Accounts Receivable; decrease Cash

Question 73

Separating the custody of assets from accounting for assets is a part of which element of internal control?

A)Information and communication
B)Monitoring
C)Control environment
D)Control procedures

Question 74

A credit memorandum from the bank :

A)decreases a bank customer's account.
B)is used to show a bank service charge.
C)shows that a company has deposited a customer's NSF check.
D)shows the bank has collected a note receivable for the customer.

Question 75

A bank reconciliation should be prepared periodically because:

A)the depositor's records and the bank's records are in agreement.
B)the bank has not recorded all of its transactions.
C)any differences between the depositor's records and the bank's records should be determined,and any errors made by either party should be discovered and corrected.
D)the bank must make sure that its records are correct.

Question 76

A check drawn by a depositor for $295 in payment of a liability was recorded in the depositor's book as $925.The $630 difference would be included on the bank reconciliation as a(n):

A)addition to the cash balance per books.
B)addition to the cash balance per bank.
C)deduction from the cash balance per bank.
D)deduction from the cash balance per books.

Question 77

Which of the following is true of EFT?

A)It cost more than receiving cash payments through the mail.
B)It can process certain cash transactions at less cost than by using the mail.
C)It is easy to document purchase and sale transactions.
D)It means Effective Funds Transfer.

Question 78

Accompanying the bank statement was a debit memorandum for bank service charges.What adjustment is required in the depositor's accounts?

A)Increase Miscellaneous Expense; decrease Cash
B)Increase Cash; increase Other Income
C)Increase Cash; increase Accounts Payable
D)Decrease Accounts Payable; decrease Cash

Question 79

Which element of internal control observes employees' behavior and the accounting system for indicators of control problems?

A)Control environment
B)Risk assessment
C)Control procedures
D)Monitoring

Question 80

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item would be included on the bank reconciliation as a(n):

A)deduction from the cash balance per books.
B)addition to the cash balance per bank.
C)deduction from the cash balance per bank.
D)addition to the cash balance per books.