Exam 7: Fraud, Internal Control, and Cash

The following reconciling items are applicable to the bank reconciliation for the Hunsicker Company. Indicate how each item should be shown on a bank reconciliation. a. Outstanding checks. b. Bank credit memorandum for collecting a note for the depositor. c. Bank debit memorandum for service charge. d. Deposit in transit.

The Sarbanes-Oxley Act applies to

Below are descriptions of internal control problems. In the space to the left of each item, enter the code letter of the one best internal control principle that is related to the problem described. 1. The same person opens incoming mail and posts the accounts receivable subsidiary ledger. 2. Three people handle cash sales from the same cash register drawer. 3. A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise. 4. The person who is authorized to sign checks approves purchase orders for payment. 5. Some cash payments are not recorded because checks are not prenumbered. 6. Cash shortages are not discovered because there are no daily cash counts by supervisors. 7. The treasurer of the company has not taken a vacation for over 20 years.

Identify whether each of the following items would be (a) added to the book balance, or (b) deducted from the book balance in a bank reconciliation. 1. EFT transfer to a supplier 2. Bank service charge 3. Check printing charge 4. Error recording check # 214 which was written for $230 but recorded for $320 5. Collection of note and interest by bank on company's behalf

Which one of the following would not cause a bank to debit a depositor's account?

The principle of establishing responsibility does not include

Which of the following items would be reported as cash on the statement of financial position?

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

Checks from customers who pay their accounts promptly are called outstanding checks.

Bertram Company assembled the following information in completing its May bank reconciliation: balance per bank ₤23,460 outstanding checks ₤5,325; deposits in transit ₤3,750; NSF check ₤2,040; bank service charge ₤75; cash balance per books ₤24,000. As a result of this reconciliation, Bertram will

Internal control consists of all the related methods and measures adopted within an organisation to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations.

The cash balance per books for Feagen Company on September 30, 2014 is $10,740.93. The following checks and receipts were recorded for the month of October, 2014: In addition, the bank statement for the month of October is presented below: Check No. 18 was correctly written for $708.62 for a payment on account. The NSF check was from S. Long, a customer, in settlement of an accounts receivable. An entry had not been made for the NSF check. The credit memo is for the collection of a note receivable including interest of $60 which has not been accrued. The bank service charge is $35.00. Instructions (a) Prepare a bank reconciliation at October 31. (b) Prepare the adjusting journal entries required by the bank reconciliation.

Joe Foss has worked for Dr. Sam Milton for several years. Joe demonstrates a loyalty that is rare among employees. He hasn't taken a vacation in the last three years. One of Joe's primary duties at the medical office is to open the mail and list the checks received. He also takes cash from patients at the cashier window as patients leave. At times it is so hectic that Joe doesn't bother with giving each patient a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office, Joe offers to help Ann post the payments to the patients' accounts receivable. She is always happy to receive his help because he is a very conscientious worker. Instructions Identify any principles of internal control that may be violated in this medical office situation.

Allowing only the treasurer to sign checks is an example of

Maximum benefit from independent internal verification is obtained when

If a company deposits all its receipts in the bank and pays all its bills by check, then the monthly bank statement balance will always agree with the company's record of its checking account balance.

Franco Company wrote checks totaling €37,090 during June and €38,650 during July. In June, €36,250 of these checks cleared the bank. In July, checks of €38,230 cleared the bank. What was the amount of outstanding checks at July 31?

A check correctly written for $270 was incorrectly entered in the cash payments journal for $720. In preparing a bank reconciliation, $_____________ must be ______________ the cash balance per ______________.

Internal control consists of the related methods and measures adopted to ____________ its assets, enhance the ______________ of its records and ensure______________ with laws and regulations.