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Exam 4: Cash and Internal Controls

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Question 31

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Discuss the events leading up to the passage of the Sarbanes-Oxley Act and its major provisions.

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Two of the highest-profile cases (Enron ...

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Question 32

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A deposit outstanding will cause the bank's cash balance to be higher than the company's cash balance.

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Question 33

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Which employees are the ones who must take final responsibility for the establishment and success of internal controls?

The control environment refers to the overall top-to-bottom attitude of the company with respect to internal controls.

What is the purpose of the statement of cash flows? List the three major categories of cash flows and give an example of a cash transaction for each category.

Common types of financial statement fraud include creating fictitious revenues from a fake customer, improperly valuing assets, and mismatching revenues and expenses.

The Public Company Accounting Oversight Board (PCAOB) has the authority to establish standards dealing with auditing, quality control, ethics, independence, and other activities relating to the preparation of audited financial reports.

Having management periodically determine whether the amount of physical assets of the company match the accounting records is an example of which detective control?

Which of the following would NOT represent good controls over cash receipts?

When a company pays for services received using a check, it should credit Accounts Payable until the check is paid by the bank.

The petty cash fund should have just enough cash to make minor expenditures over a reasonable period (such as a week or a month).

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Allows users to purchase items without having to pay cash immediately.

A company establishes a petty cash fund for $400. By the end of the month, employees had made the following expenditures from the fund: supplies, $150; fuel for deliveries, $120; postage, $75; miscellaneous, $35. Record the entry to recognize expenditures from the petty cash fund.

The statement of cash flows reports a company's cash inflows and cash outflows related to (1) operating activities, (2) investing activities, and (3) financing activities.

McGregor Company allows customers to pay with credit cards. The credit card company charges McGregor 3% of the sale. When a customer uses a credit card to pay McGregor $200 for services provided, McGregor would:

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Matches the balance of cash in the bank account with the balance of cash in the company's own records.

Indicate whether the firm should add or subtract each item below from its balance of cash or the bank's balance of cash in preparing a bank reconciliation.

Cash flows from investing do not include cash flows from:

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -____ Management must document the effectiveness of procedures that could affect financial reporting.

During the year, a company issues common stock for $50,000 and repays previously borrowed amounts of $75,000. In addition, the company pays dividends of $5,000 to stockholders. Determine the amount of financing cash flows the company will report in the current year.