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Exam 5: Internal Control and Cash

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Question 31

True/False

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

A) True
B) False

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Question 32

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

A) True
B) False

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Question 33

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Which of the following is an element of the control environment?

Anna erroneously records a check drawn for $385 as $835.This error is adjusted on the bank reconciliation as a(n) :

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

The Sarbanes-Oxley Act requires companies and their independent accountants to report on the effectiveness of the company's internal controls.

On the bank's accounting records, customers' accounts are normally shown as a(n) :

For each of the following procedures, indicate whether it is an internal control strength or a weakness.Also, for each weakness, explain why it is a weakness and how it can be corrected. (a)Only the best accounting graduates are hired to eliminate the need for training. (b)The person responsible for order supplies also records the receipt of the supplies. (c)Company policy mandates that all employees take vacation time. (d)Internal auditors constantly monitor the internal control system. (e)The accountant deposits cash at least once each day.

The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the:

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.

Which of the following warning signs could mean receipts are being pocketed before being deposited?

A special cash fund used to make small payments that occur frequently is called a(n) :

Money orders are considered cash.

Which of the following of internal control deals with hiring, training, evaluation, compensation, and promotion of employees?

The amount of the "adjusted balance" appearing on a 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.

Describe the features of a voucher system and list typical supporting documents for a voucher.

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would be included on the bank reconciliation as a(n) :

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

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

When preparing a bank reconciliation statement, outstanding checks would: