Exam 7: Fraud, Internal Control, and Cash

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Match each of the following principles of internal control with the appropriate description below. A. Establishment of responsibility B. Segregation of duties C. Documentation procedures D. Physical controls E. Independent internal verification F. Human resource controls _____ 1. Involves the review, comparison, and reconciliation of data prepared by other employees. _____ 2. Provide evidence that transactions and events have occurred. _____ 3. Includes the authorization and approval of transactions. _____ 4. Rotating employees' duties and requiring employees to take vacations. _____ 5. Related activities should be assigned to different individuals. _____ 6. Using garment sensors to deter theft.

All of the following would involve a debit memorandum except

The most important element of the fraud triangle is

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. Internal Control Principles A. Establishment of responsibility B. Segregation of duties C. Physical controls D. Documentation procedures E. Independent internal verification F. Human resource controls 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 pre-numbered. 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.

A check returned by the bank marked "NSF" means

The entry to replenish a petty cash fund includes a credit to

Hoppmann Company wrote checks totaling $25,620 during October and $27,975 during November. $24,360 of these checks cleared the bank in October, and $27,330 cleared the bank in November. What was the amount of outstanding checks on November 30?

In preparing a bank reconciliation, outstanding checks are ______________ from the cash balance per ______________.

Control over cash disbursements is generally more effective when

Carothers Company assembled the following information in completing its March bank reconciliation: balance per bank $7,640; outstanding checks $1,550; deposits in transit $2,500; NSF check $160; bank service charge $50; cash balance per books $8,800. As a result of this reconciliation, Carothers will

A voucher system is used by many large companies as a means of controlling cash receipts.

Jolene is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

A bank statement

A credit balance in Cash Over and Short is reported as a(n)

On October 1, Head and Heart Company's petty cash fund of $150 is replenished. The fund contains cash of $30, and receipts for supplies of $75 and postage of $45. Prepare the journal entry to record the replenishment of the petty cash fund.

If the month-end bank statement shows a balance of $72,000, outstanding checks are $54,000, a deposit of $15,000 was in transit at month end, and a check for $3,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

A voucher is recorded in the ________________ and filed according to the date on which it is to be paid.

A debit memorandum would not be issued by the bank for