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

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Question 31

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Indicate whether each of the following statements regarding internal controls is true or false. -A fidelity bond is a form of insurance that companies buy to protect themselves from loss due to employee dishonesty

A) True
B) False

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Question 32

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For each of the following items, indicate whether it is an adjustment to the bank side, the book side, or not applicable when preparing a bank reconciliation. For each adjustment item, indicate whether the amount would be added or subtracted. $\begin{array} { | l | l | l | } \hline \text { Item } & \begin{array} { l } \text { Bank } \\\text { Balance }\end{array} & \begin{array} { l } \text { Book } \\\text { Balance }\end{array} \\\hline \text { Deposit in transit } & & \\\hline \text { Debit memo } & & \\\hline \text { Outstanding check } & & \\\hline \text { NSF check } & & \\\hline \begin{array} { l } \text { Error in recording a check on the books } \\\text { (check was written for } \$ 35 \text { but recorded as } \\\text { \$53) }\end{array} & & \\\hline \text { Service charge } & & \\\hline \text { Interest earned on the account } & & \\\hline\end{array}$

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Question 33

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Indicate whether each of the following statements about a bank statement is true or false. -A bank statement generally shows a running balance on the customer's account, as well as the balance at the beginning and end of the period

Check no. 147 for $200 was outstanding as of September 30. In performing the September bank reconciliation, this outstanding check should be

Indicate whether each of the following statements about a bank statement is true or false. -In the bank's accounting records, a customer's checking account is a liability

While performing its monthly bank reconciliation, the bookkeeper for the Partin Company discovered that a check written for $421 for advertising expense was recorded in the firm's books as $241. Which of the following shows the effect of the correcting entry on the financial statements?

Hyperion Company has established internal control policies and procedures in order to achieve the following objectives: (1) Safeguard the company's assets (2) Assure that the accounting records contain reliable information (3) Evaluate management performance effectively (4) Assure that employees comply with company policies Which of these objectives are primarily achieved by accounting controls?

Osborn Company's unadjusted book balance at June 30, 2014 is $7,800. The company's bank statement reveals bank service charges of $45. Two credit memos are included in the bank statement: one for $900 which represents a collection of an account receivable that the bank made for Osborn and one for $10 which represents the amount of interest that Osborn had earned on its interest-bearing checking account in June. Based on this information, Osborn's true cash balance is:

Balfour Company prepared the following information as part of its bank reconciliation as of October 31, 2014: 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.

In preparing a bank reconciliation, typical adjustments to the book balance include bank service charges, customer NSF checks, and interest earned on the account.

Discuss the three elements that are typically present when fraud occurs.

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

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

Which of the following is not a reason why a business needs strong internal controls over cash?

Which of the following is not one of the purposes of an internal control system?

Indicate whether each of the following statements about a bank statement is true or false. -Bank statement credit memos describe transactions that increase the bank customer's account balance

Indicate whether each of the following statements regarding internal controls is true or false. -Internal controls provide complete assurance that the objectives of an enterprise will be accomplished

A bank deposit made on June 30 did not appear on the June bank statement. In doing the June bank reconciliation, this deposit in transit should be

What is a financial statement audit?

Which of the following is not a generally recognized internal control procedure?