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Exam 4: Internal Controls,accounting for Cash,and Ethics

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Question 21

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How does the Sarbanes-Oxley Act affect the responsibilities of the managers of a large US corporation?

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Under the terms of the Act,the chief exe...

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Question 22

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Indicate which of the following items is added to or subtracted from a company's unadjusted book balance to calculate the true cash balance in preparing a bank reconciliation.Place a + by those items that are added to the book balance,a - by those items that are subtracted,and NA by items that are not added to or subtracted from the book balance.

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Question 23

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What are NSF checks?

Accounting controls are designed to:

One of your friends is preparing to open a store that will sell clothing and fashionable accessories.When you heard that the business would have three or four employees,you told your friend that she would need to pay careful attention to separation of duties.She has asked you to explain what duties should be separated and why separation of duties is important in a business.Write a note to your friend explaining these issues.

Dent Company's unadjusted bank balance at March 31,2012 is $3,000.The bank reconciliation revealed outstanding checks amounting to $500 and deposits in transit of $300.Based on this information,Dent's true cash balance is:

What is a deposit in transit?

The confidentiality rules in the AICPA's code of ethics for CPAs prohibits accountants

The three elements that are typically present when fraud occurs are opportunity,pressure,and rationalization.

What asset of a business is most susceptible to theft?

In a bank reconciliation,a customer's NSF check included with the bank statement is:

A well-designed system of internal controls will eliminate employee theft and fraud in a company.

Which of the item(s) would be subtracted from the unadjusted bank balance to determine the true cash balance?

One of the requirements of the code of ethics of the AICPA is that members must act in a way that serves the public interest.

What is an outstanding check?

Internal controls that assess degree of compliance with company policies are classified as accounting controls.

Why would a merchandising company need good internal controls related to its inventory? List three of the key elements of an internal control system that would apply to inventory,and explain how each of them relates to inventory.

The usual form for a bank reconciliation begins with the ending cash balance shown on the bank statement and reconciles it to the ending cash balance on the company's books.

Discuss the types of audit opinions that an independent auditor can express on a company's financial statements.

Balfour Company prepared the following information as part of its bank reconciliation as of October 31,2012: Required: Indicate how each of the transactions reflected in the bank reconciliation would affect Balfour's financial statements,using the model provided.Enter dollar amounts of increases and decreases.For each cash flow,indicate whether it is an operating (OA),investing (IA),or financing (FA)activity.