Exam 7: Fraud, Internal Control, and Cash

Important objectives of a system of internal controls are to safeguard assets and to enhance the accuracy and reliability of the accounting records. Briefly discuss how (1) cost-benefit considerations, (2) the human element, and (3) the size of the business, affect the implementation of a system of internal controls.

A highly automated computerized system of accounting eliminates the need for internal control.

Shane Company gathered the following reconciling information in preparing its April bank reconciliation: The adjusted cash balance per books on April 30 is

Allowing only the treasurer to sign checks is an example of

Two individuals at a retail store work the same cash register. You evaluate this situation as

Bank errors

Match the internal control principle below with the appropriate cash disbursements procedure described. a. Establishment of responsibility d. Physical controls b. Segregation of duties e. Independent internal verification c. Documentation procedures f. Human resource controls _____ 1. Compare checks to invoices. _____ 2. Different individuals approve and make payments. _____ 3. Print check amounts by machine with indelible ink. _____ 4. Only designated personnel are authorized to sign checks. _____ 5. Each check must have approved invoice. _____ 6. Requiring employees to take vacations.

The cash records of Jasmin Company show the following four situations. 1. The June 30 bank reconciliation indicated that deposits in transit total $2,110. During July the general ledger account Cash shows deposits of $23,620, but the bank statement indicates that only $23,400 in deposits were received during the month. 2. The June 30 bank reconciliation also reported outstanding checks of $1,250. During the month of July, Jasmin Company books show that $25,800 of checks were issued. The bank statement showed that $24,600 of checks cleared the bank in July. 3. In September, deposits per the bank statement totaled $40,100, deposits per books were $38,100, and deposits in transit at September 30 were $2,900. 4. In September, cash disbursements per books were $36,550, checks clearing the bank were $37,500, and outstanding checks at September 30 were $3,200. There were no bank debit or credit memoranda. No errors were made by either the bank or Jasmin Company. Instructions Answer the following questions. (a) In situation (1), what were the deposits in transit at July 31? (b) In situation (2), what were the outstanding checks at July 31? (c) In situation (3), what were the deposits in transit at August 31? (d) In situation (4), what were the outstanding checks at August 31?

The duties of approving an item for payment and paying the item should be done by different departments or individuals.

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.

Using pre-numbered checks and having an approved invoice for each check is an example of

What percentage of companies worldwide have experienced fraud in a recent two-year period?

On a bank reconciliation, deposits in transit are

At April 30, Yaddof Company has the following bank information: cash balance per bank $2,300; outstanding checks $390; deposits in transit $275; credit memo for interest $50; bank service charge $10. What is Mareska's adjusted cash balance on April 30?

A debit memorandum could show the collection of a note receivable by the bank.

Cash equivalents are defined by IFRS as

A segregation of duties among employees eliminates the possibility of collusion.

Internal control is mainly concerned with the amount of authority a supervisor exercises over a subordinate.

At June 30, Yaddof Company has the following bank information: cash balance per bank $1,800; outstanding checks $340; deposits in transit $275; credit memo for interest $75; bank service charge $10. What is Mareska's adjusted cash balance on June 30?

A petty cash fund should be replenished