Exam 8: Cash and Internal Controls

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are the specific requirements for auditors set forth by SOX?

A __________is a report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. -The journal entry to record the reimbursement of the fund on September 30 includes a:

Define an internal control system and describe its purpose.

Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on August 31, its Cash account shows a debit balance of $13,162. Franklin's August bank statement shows $14,237 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit \ 4,500 Outstanding checks \ 3,900 Bank service fees, not yet recorded by company \ 50 The bank collected on a note receivable, not yet recorded by the company \ 1,725 The adjusted cash balance should be:

Pelcher Co. maintains a $400 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $110 for office supplies, $140 for merchandise inventory, and $70 for miscellaneous expenses. There is a cash overage of $4. - Based on this information, the amount of cash in the fund before the replenishment is:

Harsh penalties exist for violators of the Sarbanes-Oxley Act (SOX) - sentences up to 25 years in prison with severe fines.

The three parties involved with a check are:

In order to streamline the purchasing process, department managers should place orders directly with suppliers.

Freeman Co. had net sales of $4.2 million and ending accounts receivable of $0.8 million. Its days' sales uncollected equals:

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Vouchers should be used for purchases of inventory and all other expenditures made within a company.

Two sales clerks not being permitted to share the same cash register is an example of the internal ^{control principle of ________}.

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

The principles of internal control include:

________ are short-term, highly liquid investment assets that are readily convertible to a known amount of cash.

Deposits made and recorded by the depositor but not yet recorded on the bank statement are called ^________.

A key factor in a voucher system includes all of the following except:

A ________ is a document explaining the payment of a check.

Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.