Question 1

A company establishes a $200 petty cash fund.The fund is replenished in the amount of $180,after petty cash vouchers of $80 for postage,$68 for donations,and $54 for meals had accumulated.Was there a cash shortage,overage,or neither? (State amount if overage or shortage. )

Accepted Answer

The answer of A company establishes a $200 petty cash...

Question 2

Mandisa Sounds,Inc. ,a specialty retailer of customized audio systems for automobiles,installed a perpetual inventory system in the second quarter of 2011.The new system allowed the firm to adjust its merchandise inventories to sales patterns more effectively and to prepare monthly financial statements.Although the system led to an improvement in sales and income,the gross margin on the monthly income statements was falling below both management's expectations and the industry average.At the end of 2014,a physical inventory revealed that actual merchandise inventory was considerably lower than the perpetual inventory records indicated.The merchandise inventories of some stores were off more than others,but all had deficiencies.What probably caused these losses and what steps could be taken to prevent them in the future?

Accepted Answer

The answer of Mandisa Sounds,Inc. ,a specialty retailer of customized...

Question 3

The following is a quote found in a company's annual report: 
In our opinion,the Company maintained,in all material respects,effective internal control over financial reporting...
This statement would have been made by
A)the company's independent auditors.
B)the chief financial officer.
C)the chief executive officer.
D)the board of directors.

Accepted Answer

This statement is typically found in the "Auditor's Report" section of a company's annual report, indicating that it was made by the independent auditors who have conducted an audit of the company's financial statements and internal control over financial reporting.

Question 4

The management of public companies must establish systems that
A)safeguard the firm's assets.
B)ensure reliability of its accounting records.
C)see that employees comply with legal requirements
D)do all of these.

Accepted Answer

The management of public companies must establish systems that safeguard the firm's assets, ensure reliability of its accounting records, and see that employees comply with legal requirements. All these measures are essential to create a strong and sustainable business that can thrive in the long-term. Therefore, option D, "do all of these," is the best answer.

Question 5

The Report of Management in Brighton Company's annual report states,"Management has established a system of internal controls to provide reasonable assurance that assets are maintained and accounted for in accordance with its policies and that transactions are recorded accurately on the company's books and records." Name five control activities Townsgate could and probably does implement.

Accepted Answer

The answer of The Report of Management in Brighton Company's...

Question 6

An accountant is responsible for the following activities: (1)receiving all cash; (2)maintaining the general ledger; (3)maintaining the accounts receivable subsidiary ledger that includes the individual records of each customer; (4)maintaining the journals for recording sales,purchases,and cash receipts;and (5)preparing monthly statements to be sent to customers.As a service to customers and employees,the company allows the accountant to cash checks of up to $75 with money from the cash receipts.When deposits are made,the checks are included in place of the cash receipts.What weaknesses in internal control exist in this system?

Accepted Answer

The answer of An accountant is responsible for the following...

Question 7

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control,except for the
A)chief financial officer.
B)the independent auditors.
C)the board of directors.
D)chief executive officer.

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires the chief financial officer and the chief executive officer to certify the accuracy of financial reports. Independent auditors are required to attest to the adequacy of the company's internal controls over financial reporting. The board of directors is not required to certify the company's system of internal controls, making option C the correct answer.

Question 8

The Sarbanes-Oxley Act of 2002 does not apply to
A)public companies with assets over $300 million.
B)public companies with assets under $1 million.
C)privately owned companies.
D)companies established after 2002.

Accepted Answer

The Sarbanes-Oxley Act of 2002 only applies to publicly traded companies, and therefore does not apply to privately owned companies regardless of their size or when they were established. Option A is incorrect because SOX applies to publicly traded companies, regardless of their assets. Option B is incorrect because SOX applies to publicly traded companies, regardless of their assets. Option D is incorrect because SOX applies to publicly traded companies established before or after 2002.

Question 9

Explain management's responsibility as it pertains to internal control of a company.

Accepted Answer

The answer of Explain management's responsibility as it pertains to...

Question 10

Why do businesses need to keep some currency on hand?

Accepted Answer

The answer of Why do businesses need to keep some...

Question 11

Public companies are required to
A)have an independent audit of financial statements.
B)have an audit of the internal control systems.
C)fully document and certify the company's system of internal controls.
D)do all of these.

Accepted Answer

Public companies are required to have an independent audit of financial statements, an audit of the internal control systems, and fully document and certify the company's system of internal controls. This is to ensure accuracy and transparency in financial reporting and prevent fraud. Therefore, all of these choices are required for public companies.

Question 12

Under a perpetual inventory system,is it necessary to take a physical inventory at the end of the period? Why or why not?

Accepted Answer

The answer of Under a perpetual inventory system,is it necessary...

Question 13

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control
A)in the company's annual report.
B)in a public statement posted on social media.
C)in a posted notice at the front of company headquarters.
D)in all of these.

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control in the company's annual report. This is a formal, transparent and easily accessible way for companies to communicate their responsibility for internal controls to stakeholders. Posting on social media or a notice at the front of company headquarters may not be as formal or easily accessible to stakeholders as an annual report.

Question 14

Privately owned companies
A)are required to have an independent CPA audit their financial statements.
B)are required to have their internal control systems audited.
C)are required to have both the financial statements and internal control systems audited.
D)are not required to do any of these.

Accepted Answer

Privately owned companies are not required by law to have an independent CPA audit their financial statements or internal control systems. However, they may choose to do so for their own benefit or at the request of investors or lenders.

Question 15

Jasmine Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).
April  5$\quad$$\quad$ Estabished a $200 petty cash fund with cash withdrawn from company checking account.
30$\quad$$\quad$$\quad$ $\quad$The petty cash fund has $10 remaining and is replenished. Expenditures for April were $60 for supplies, $50 for meals, $65 for postage, and $20 for freight-in.
May 31$\quad$$\quad$ The petty cash fund has $20 remaining and is replenished. Expenditures for May were $55 for postage, $40 for charitable contributions, $56 for supplies, and $25 for freight-in.

Accepted Answer

The answer of Jasmine Company has established a petty cash...

Question 16

Chaney Company has established a petty cash fund for small expenditures.Prepare journal entries for the following transactions (omit explanations).
June   5$\quad$$\quad$$\quad$Estabished a $250 petty cash fund with cash withdrawn from company checking account.
30$\quad$$\quad$$\quad$$\quad$ The petty cash fund has $12 remaining and is replenished. Expenditures for June were $75 for supplies, $60 for meals, $80 for postage, and $25 for freight-in.
July 31$\quad$$\quad$$\quad$The petty cash fund has $24 remaining and is replenished. Expenditures for July were $70 for postage, $45 for charitable contributions, $80 for supplies, and $30 for freight-in.

Accepted Answer

The answer of Chaney Company has established a petty cash...

Question 17

On a balance sheet,what items normally are included in Cash?

Accepted Answer

The answer of On a balance sheet,what items normally are...

Question 18

The Sarbanes-Oxley Act has succeeded in
A)heightening awareness and diligence with respect to internal control.
B)increasing transparency in privately owned companies.
C)stopping fraud from occurring.
D)all of these.

Accepted Answer

The Sarbanes-Oxley Act has succeeded in heightening awareness and diligence with respect to internal control. It has mandated that companies maintain adequate internal control systems, annual audits, and certifications in financial reporting. However, it has not completely stopped fraud from occurring, nor has it increased transparency in privately owned companies.

Question 19

Why is the separation of duties an important control activity in a good system of internal control?

Accepted Answer

The answer of Why is the separation of duties an...

Question 20

Compute the correct amount for each letter in the following table:

Accepted Answer

The answer of Compute the correct amount for each letter...

Quiz 8: Cash and Internal Control

A company establishes a $200 petty cash fund.The fund is replenished in the amount of $180,after petty cash vouchers of $80 for postage,$68 for donations,and $54 for meals had accumulated.Was there a cash shortage,overage,or neither? (State amount if overage or shortage. )

The following is a quote found in a company's annual report: In our opinion,the Company maintained,in all material respects,effective internal control over financial reporting... This statement would have been made by

The management of public companies must establish systems that

The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control,except for the

The Sarbanes-Oxley Act of 2002 does not apply to

Explain management's responsibility as it pertains to internal control of a company.

Why do businesses need to keep some currency on hand?

Public companies are required to

Under a perpetual inventory system,is it necessary to take a physical inventory at the end of the period? Why or why not?

The Sarbanes-Oxley Act of 2002 requires management to acknowledge its responsibility for internal control

Privately owned companies

On a balance sheet,what items normally are included in Cash?

The Sarbanes-Oxley Act has succeeded in

Why is the separation of duties an important control activity in a good system of internal control?

Compute the correct amount for each letter in the following table: