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

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Question 1

Multiple Choice

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Which of the following is not considered as cash?

A) Commercial paper
B) Checks
C) Money orders
D) Coins

E) A) and D)
F) All of the above

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Question 2

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A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid.

A) True
B) False

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Question 3

Multiple Choice

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When a firm uses internal auditors, it is adhering to which of the following internal control elements?

Requiring employees to take annual vacations is part of which element of internal control?

Which of the following would be added to the cash balance per books on a bank reconciliation?

Money market funds, commercial paper, and U.S. Treasury Bills are examples of cash equivalents.

What is the purpose of the Sarbanes-Oxley Act of 2002, and why was it enacted?

In preparing a bank reconciliation, the amount of deposits in transit is deducted from the cash balance per books.

In preparing a bank reconciliation, the amount of outstanding checks is added to the cash balance per books.

Management's philosophy and operating style would affect which of the following elements of internal control?

Receipts from cash sales of $7,500 were recorded incorrectly by the depositor as $5,700. What adjustment is required in the bank's accounts?

The bank statement for Marley Co. indicates a balance of $10,000.50 on June 30, 2013. The cash account for the company had a balance of $4,677.10. Prepare a bank reconciliation on the basis of the following reconciling items: (a)Cash sales of $\$ 342$ had been erroneously recorded as $\$ 324$ . (b)Deposits in transit not reconded by bank, $\$ 700$ . (c)Bank debit memorandun for service charges, $\$ 30$ . (d)Bank credit memorandum for note collected by bank, $\$ 2,050$ , including $\$ 50$ interest. (e)Bank debit memoranchum for $\$ 207.40$ NSF (not sufficient funds) check from Alice Martin, a customer. (f)Checks outst anding $\$ 4,192.80$ .

Which of the following should not be considered cash by an accountant?

A check drawn by a depositor for $810 in payment of a liability was recorded by the depositor as $180. The $630 difference would be included on the bank reconciliation as a(n) :

A voucher is a form where pertinent data about a liability and the particulars of its payment are recorded.

All organizations face risks, and the assessment of these risks is necessary so that the objectives of internal control can be achieved.

A voucher system is an example of an internal control procedure over cash receipts.

A check for $456 was erroneously charged by the bank as $654. In order for the bank reconciliation to balance, you must subtract $198 from the bank statement balance.

Internal control does not consist of policies and procedures that:

In preparing a bank reconciliation, the amount indicated by a debit memorandum for bank service charges is added to the cash balance per books.