76 Multiple choice questions
- Debit Service Fee Expense for $6.
- Maximum purchase limits set on debit and credit cards.
(Think about authorization for all purchases and use of credit and debit cards.)
credit to Cash (Recording the establishment of a petty cash account
will include a debit to the Petty Cash account and a credit to Cash.)
- The actual performance of individuals or processes should be checked against their expected performance.
- Debit to Accounts Receivable.
the lead auditor in charge of auditing a particular company must rotate
off that company within five years and allow a new audit partner to
take the lead.
- reconciling the bank's cash balance, reconciling the company's cash balance, and adjusting the company's cash balance.
transactions to establish the fund, recognize expenditures from the
fund, and replenish the fund as the cash balance becomes sufficiently
- Small amount of cash kept on hand to pay for minor purchases
use of one's occupation for personal enrichment through the deliberate
misuse or misapplication of the employing organization's resources
- A company's plans to (1) safeguard the company's assets and (2) improve the accuracy and reliability of accounting information
Act, also known as the Public Company Accounting Reform and Investor
Protection Act of 2002 and commonly referred to as SOX.
- Outstanding Check (After a bank recieves the checks outstanding, the banks cash balance will decrease.)
- disbursing physical cash, writing checks and using credit cards and debit cards to make payments.
- True, From a store's perspective, think of similarities between debit cards and credit cards.
company should provide employees with appropriate guidance to ensure
they have the knowledge necessary to carry out their job duties.
the first two steps, we should catch timing differences as well as
errors made by either the company or the bank. In the third step, we
update the company's accounting records for cash transactions that have
occurred but have not yet been recorded.
- Acceptance of Credit Cards
- Cash receipts of the company that have not been added to the bank's record of the company's balance
- Timing Difference
- The ability of net income to help predict future performance of the company
reliability of the accounting information system itself. If the
accountant's office has papers scattered everywhere, and you learn the
company still does all its accounting by hand without a computer,
wouldn't you, as an investor or lender, be a bit worried?
Example:an anonymous tip hotline should be in place to encourage communication about unethical activities, such as an employee giving concession items free to her friends.
against the company's checking account and putting that amount of
withdrawn cash in the hands of an employee who becomes responsible for
coins, balances in savings and checking accounts, items acceptable for
deposit in these accounts (such as checks received from customers), and
responsible for making cash disbursements are not in charge of cash
receipts. ( Preventive controls are designed to keep errors or fraud
from occurring in the first place.)
errors or fraud from occurring in the first place. These include
separation of duties, physical controls over assets and accounting
records, proper authorization to prevent improper use of the company's
resources, and employee management.
- identifies and analyzes internal and external risk factors that could prevent a company's objectives from being achieved.
risks for the theatre include issues such as unsafe lighting, faulty
video projectors, unsanitary bathrooms, and employee incompetence with
regard to food preparation. Common examples of external risks include a
vendor supplying lower-grade or unsafe popcorn, moviegoers' security in
the parking lot, or perhaps the decline in customer demand from DVD
rentals or On Demand at home.
- preventive and detective
personnel routinely reconciles the company's cash records with those of
its bank to identify discrepancies. (Bank reconciliation is an example
of a detective control.)
- control environment, risk assessment, control activities, monitoring, and information and communication.
- Debit $20 to Service Fee Expense
- Checks the company has written that have not been subtracted from the bank's record of the company's balance
- Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
- False, Think about the requirement for appropriate documentation.
- whether the internal controls are adequate.
procedures for reporting control deficiencies. Monitoring of internal
controls needs to occur on an ongoing basis. For instance, a movie
theater manager should compare daily cash from sales with the number of
tickets issued, compare concession sales with units purchased, and make
sure employees are paid only for actual hours worked.
- To prevent improper use of the company's resources, only certain employees are allowed to carry out certain business activities.
- True, We need to reduce the balance in the petty cash account to recognize expenditures.
- Two+ people acting in coordination to circumvent internal controls.
- False, The journal entry is similar to the one required to establish a petty cash fund.
- Operating cash flows plus investing cash flows during the period
- The company should maintain security over assets and accounting records.
public companies whose chief executives worked for the audit firm and
participated in that company's audit during the preceding year.
- sets the overall ethical tone of the company with respect to internal control.
last one is credit cash 2458
- Accounts Payable
- audit committee of the Board of Directors of the company, not by company management.
- detect errors or fraud that already have occurred. These include reconciliations and performance reviews.
and procedures that help ensure that management's directives are being
carried out. These activities include authorizations, reconciliations,
and separation of duties.
- If the cashier and the accountant in a firm decide to work together to steal cash, theft will be much more difficult to detect.
- Public Company Accounting Oversight Board (PCAOB),
the balance of cash in the bank account with the balance of cash in the
company's own records. (If you have your own checking account, you know
that the balance of cash in your checkbook often does not equal the
balance of cash in your bank account.)
- 7 years or face a prison term for willful violation.
- certain non-audit services, such as consulting, for their clients.
the authority to establish standards dealing with auditing, quality
control, ethics, independence, and other activities relating to the
preparation of audited financial reports.
investments that have a maturity date no longer than 3 months from the
date of purchase. Common examples of such investments are money market
funds, Treasury bills, and certificates of deposit.
- Individuals who have physical responsibility for assets should not also have access to accounting records.
include items such as interest earned by the company, collections made
by the bank on the company's behalf, service fees, and charges for NSF
- False, Think of responsibilities of executives after the passing of the Sarbanes-Oxley Act.
transactions, recording transactions, and maintaining control of the
related assets should be separated among employees.
- Checks drawn on nonsufficient funds, or "bad" checks from customers
- Debit Petty Cash, $350.
- Cash for 250 (Think of the asset account that the company would have increased earlier, when it recieved the check.)
- Internal Controls
- A week or Month
- the store records the $5,000 credit card transaction as $4,850 cash received and $150 service fee expense.
transactions, recording transactions, and maintaining control of the
related assets should be separated among employees
- Make all disbursements, other than small ones, by check, debit card, or credit card.
Authorize all expenditures before purchase and verify the accuracy of the purchase itself.
Make sure checks are serially numbered and signed only by authorized employees. Require two signatures for larger checks.
Periodically check amounts shown in the debit card and credit card statements against purchase receipts.
Make sure that duties are separated. Employees responsible for making cash disbursements should not also be in charge of cash receipts.