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

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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

Question 6

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

Question 7

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

Question 8

Money orders are considered cash.

Question 9

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

Question 10

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

Question 11

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

In preparing a bank reconciliation,the amount of outstanding checks is added to the balance per depositor's statement.

Question 25

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

Question 26

The amount of the "adjusted balance" appearing on the 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

In preparing a bank reconciliation,the amount of deposits in transit is deducted from the balance per depositor's records.

Question 28

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

Question 29

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

Question 30

The data needed to adjust the depositor's accounts based on the bank reconciliation are shown as adjustments to the depositor's records.

Question 31

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

Question 32

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

Question 33

In preparing a bank reconciliation,the amount indicated by a debit memorandum for bank service charges is added to the balance per depositor's records.

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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 43

Management's philosophy and operating style would affect which of the following elements of internal control?

A)Risk assessment
B)Monitoring
C)The control environment
D)Information and communication

Question 44

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 45

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

Question 46

Internal control does NOT consist of policies and procedures that

A)guarantee the company will not go bankrupt.
B)ensure that laws and regulations are being followed.
C)protect assets from misuse.
D)ensure that business information is accurate.

Question 47

A firm's internal control environment is influenced by

A)management's operating style.
B)organizational structure.
C)personnel policies.
D)all of these.

Question 48

In preparing a bank reconciliation,the amount of outstanding checks is deducted from the balance per depositor's records.

Question 49

The objectives of internal control are to

A)control the internal organization of the accounting department personnel and equipment.
B)provide reasonable assurance that assets are safeguarded,information is processed accurately,and laws and regulations are complied with.
C)prevent fraud and promote the social interest of the company.
D)provide control over "internal-use only" reports and employee internal conduct.

Question 50

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

Question 51

Risks can be analyzed to

A)assess their likelihood of occurring.
B)assess their overall significance.
C)determine actions that will minimize them.
D)do all of these.

Question 52

An element of internal control is

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

Question 53

Internal controls are important because they

A)prevent fraud and misleading financial statements.
B)eliminate fraud.
C)deter fraud and prevent theft and other abuses.
D)guarantee accurate financial statements.

Question 54

In preparing a bank reconciliation,the amount indicated by a credit memorandum for a note receivable collected by the bank is added to the balance per depositor's records.

Question 55

The business's organizational structure influences which of the following elements of
Internal control?

A)Control procedures
B)Risk assessment
C)The control environment
D)Information and communication

Question 56

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

Question 57

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 58

A minimum cash balance maintained in a bank account is called a line of credit.

Question 59

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 60

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 61

EFT

A)means Efficient Funds Transfer.
B)can process certain cash transactions at less cost than by using the mail.
C)makes it easier to document purchase and sale transactions.
D)means Effective Funds Transfer.

Question 62

On the bank's accounting records,customers' accounts are normally shown as

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

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 is needed.

Question 64

Employing internal auditors is part of which element of internal control?

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

Question 65

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)The control environment
D)Control procedures

Question 66

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

A)Risk assessment
B)Proofs and security measures
C)Monitoring
D)Separating responsibilities for related operations

Question 67

Which of the following is NOT defined as cash?

A)Commercial paper
B)Checks
C)Money orders
D)Coins

Question 68

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 69

A check drawn by a depositor for $915 in payment of a liability was recorded 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 70

An element of internal control is

A)generally accepted accounting principles.
B)control procedures.
C)concepts.
D)principles.

Question 71

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 72

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

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

Question 73

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item is a(n)

A)deduction from the balance per depositor's records.
B)addition to the balance per bank statement.
C)deduction from the balance per bank statement.
D)addition to the balance per depositor's records.

Question 74

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 75

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

A)deduction from the balance per depositor's records.
B)addition to the balance per bank statement.
C)deduction from the balance per bank statement.
D)addition to the balance per depositor's records.

Question 76

Requiring employees to take annual vacations is part of which element of internal control?

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

Question 77

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 78

A check drawn by a depositor for $295 in payment of a liability was recorded as $925.This item would be included on the bank reconciliation as a(n)

A)addition to the balance per the depositor's records.
B)addition to the balance per the bank statement.
C)deduction from the balance per the bank statement.
D)deduction from the balance per the depositor's records.

Question 79

An element of internal control is

A)fidelity insurance.
B)prepaid insurance.
C)monitoring.
D)insurance expense.

Question 80

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.