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Exam 5: Sarbanes-Oxley, Internal Control, and Cash

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Question 51

True/False

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For efficiency of operations and better control over cash, a company should maintain only one bank account.

A) True
B) False

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Question 52

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Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor. This item would be included on the bank reconciliation as a(n) :

A) deduction from the cash balance per books.
B) addition to the cash balance per bank.
C) deduction from the cash balance per bank.
D) addition to the cash balance per books.

E) All of the above
F) B) and C)

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Question 53

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Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

Using the following information, prepare a bank reconciliation for Salem Co. for May 31, 2013. (a)The bank statement balance is $\$ 2,597$ . (b)The cash ac count balance is $\$ 2,680$ . (c)Outstanding checks amounted to $\$ 703$ . (d)Deposits in transit are $\$ 732$ . (e)The bank service charge is $\$ 25$ . (f)Interest ad ded to the che cking account by the bank is $\$ 7$ . (g)A check drawn for $\$ 59$ was incorrectly charged by the bank as $\$ 95$ .

The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording transactions and preparing financial statements.

The bank informs the depositor of bank service charges by including a debit memorandum with the monthly bank statement.

The depositor reconciles the bank's statement to the depositor's records.

Adding a review of operations by an internal audit staff strengthens internal control.

In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor's records is deducted from the cash balance per books.

A debit memorandum from the bank indicates that the bank has deducted an amount from the depositor's account.

(a) Where are cash equivalents disclosed in the financial statements? (b) List three examples of cash equivalents.

Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.

The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the:

List and define each of the five elements of internal control set forth by the Integrated Framework.

A credit memorandum received with a bank statement means the company's bank account has been increased.

An element of internal control is:

Separating the custody of assets from accounting for assets is a part of which element of internal control?

When the petty cash fund is replenished, the petty cash account is adjusted for the total of all expenditures made since the fund was last replenished.

A firm's internal control environment is influenced by:

The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to: