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Exam 7: Sarbanes-Oxley, Internal Control, and Cash

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Question 31

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You are trying to explain debit and credit memos that appear on bank statements and whether these will increase or decrease your company's bank account balance. Complete the following table to help your new staff understand.

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Question 32

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A necessary element of internal control is

A) database
B) systems design
C) systems analysis
D) information and communication

E) None of the above
F) A) and C)

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Question 33

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

Which one of the following reflects a weak internal control system?

Identify each of the following as relating to a) the control environment, b) risk assessment, or c) control procedures. 1. Mandatory vacations 2. Personnel policies 3. Report of outside consultants on future market changes

In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will

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

After a bank reconciliation is completed, journal entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

The type of account and normal balance of Petty Cash is an)

Match the following elements of internal control: -risk assessment

List and define each of the five elements of internal control.

A minimum cash balance required by a bank is called

Entries are made to the petty cash account when

Two features of internal control are presented in the following sections. Each is followed by a list of four irregularities that occurred in processing data. Identify the one irregularity from each list that would be discovered or prevented by the feature of internal control described. a) The sum of the balances of the accounts in the customer's ledger is compared at the end of each month with the balance of the accounts receivable account in the general ledger by a person who has no responsibility for maintaining either the general ledger or the customer's ledger. 1) Five hours of services were rendered but the customer was only billed for four hours. 2) A cash receipt of $750 was recorded correctly in the accounts receivable controlling account but was posted to the customer's ledger as $75. 3) A bill for services rendered to Cole Co. was erroneously posted to the account of Coleman Co. in the customer's ledger. 4) No entry was made in the accounting records for services rendered to a customer. b) Both cash and credit charges for services rendered are recorded on prenumbered invoices. At the end of the day, all invoices are accounted for before the duplicate copies of the invoices are routed to the accounting department for entry into the accounts and the cash is sent to the cashier's department for deposit. 1) Some charge customers complained that the monthly statements of account did not add all amounts correctly. 2) Some clerks used incorrect hourly rates in preparing invoices. 3) Some clerks destroyed duplicate copies of cash invoices and misappropriated the cash. 4) Some charge customers complained that the monthly statement of account did not indicate credits for payments made.

The bank statement for Gatlin Co. indicates a balance of $7,735 on June 30. After the journals for June had been posted, the cash account had a balance of $4,098. a) Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724. b) Deposits in transit not recorded by bank, $425. c) Bank debit memo for service charges, $35. d) Bank credit memo for note collected by bank, $2,475 including $75 interest. e) Bank debit memo for $256 NSF not sufficient funds) check from Janice Smith, a customer. f) Checks outstanding, $1,860. Record the appropriate journal entries that would be necessary for Gatlin Co.

An example of good internal controls over cash payments is the taking of all cash discounts offered.

Consider the following journal entry made by Jones Company for one day's sales of a single cashier. Upon investigation, what might you find happened to create this amount of Cash Over/Short account difference? Give three possible reasons for this difference. Cash 2,235.00 Cash Short and Over 100.00 Sales 2,135.00

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.

During a bank reconciliation process,

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is