Chapter 7 Flashcards
The organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow
company policies, promote operational efficiency, and ensure
accurate and reliable accounting records.
Internal Control
A committee that provides thought
leadership related to enterprise risk
management, internal control, and
fraud deterrence
Committee of Sponsoring Organization
A report by management describing its responsibility for and the
adequacy of internal controls over
financial reporting. A requirement by SOX
Internal Control Report
What are the 5 components of internal control
- Control Procedures
- Risks Assessment
- Information System
- Monitoring of controls
- Environment
Dividing responsibilities between two or more people to limit fraud and promote the accuracy of accounting records
Separation of duties
Rearranging plain-text messages by a mathematical process—the primary method of achieving security in e-commerce
Encryption
A device that enables members of a local network to access
the network, while keeping nonmembers out of the network
Firewall
Two or more people working together to circumvent internal controls and defraud a company
Collusion
An optional attachment to a check that tells the business the reason for the payment
remittance advise
A procedure that compresses the
payment approval process into
a single step by comparing the
receiving report to the purchase
order.
Evaluated receipt settlement (ERS)
A streamlined process that bypasses paper documents altogether. Computers of customers
communicate directly with the computers of suppliers to automate
routine business transactions
EDI, Electronic Data Interchange
A card that shows each authorized person’s signature for a bank
account.
Signature card
A document that instructs a bank to pay the designated person or
business a specified amount of money.
Check
A bank form that is completed by the customer and shows the
amount of each deposit.
Deposit ticket
On a check, the 9-digit number that identifies the bank upon which the
payment is drawn
Routing number
A system that transfers cash by electronic communication rather
than by paper documents.
Electronic funds transfer
A document explaining the reasons for the difference between a
depositor’s cash records and the depositor’s cash balance in its bank
account
Bank reconciliation
Difference that arises between the balance on the bank statement and
the balance on the company’s books
because of a time lag in recording transactions
Timing Difference
A deposit recorded by the company but not yet by its bank.
Deposit in transit
A check issued by a company and recorded on its books but not yet
paid by its bank
Outstanding check
An increase in a bank account.
Credit memorandum
