Chapter 7 Flashcards
____ is 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
The ____ provides thought leadership related to enterprise risk management, internal control, and fraud deterrence.
Committee of Sponsoring Organizations (C O S O
companies that sell stock to the general public - are required by the U.S. Congress to maintain a system of internal controls.
public companies
____requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.
sarbanes oxley act (SOX)
a report by management describing its responsibility for and the adequacy of internal controls over financial reporting.
internal control report
oversees the work of auditors of public companies.
public company accounting oversight board (PCAOB)
components of internal control:
Control procedures
Risk assessment
Information system
Monitoring of controls
Environment
CRIME
divides responsibilities between two or more people to limit fraud and promote accuracy of accounting records.
Separation of duties
____ is when two or more people work together to circumvent internal controls and defraud a company.
Collusion
A ____ is an optional attachment to a check that tells the business the reason for the payment.
remittance advice
A ___ is a system in which customers send their checks to a post office box that belongs to a bank.
lock box system
____ is a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order.
Evaluated Receipts Settlement (E R S)
____ is a streamlined process that bypasses paper documents altogether. Computers of customers communicate directly with the computers of suppliers to automate routine business transactions.
Electronic Data Interchange (E D I)
is a fund containing a small amount of cash that is used to pay for minor expenditures.
Petty cash
_____ is a way to account for petty cash by maintaining a constant balance in the petty cash account. At any time, cash plus petty cash tickets must total the amount allocated to the petty cash fund.
imprest system
a card that shows each authorized person’s signature for a bank account.
signature card
bank account control
is a bank form that is completed by the customer and shows the amount of each deposit.
deposit ticket
bank account control
is a system that transfers cash by electronic communication rather than by paper documents.
electronic funds transfer (EFT)
compares and explains the differences between cash on the company’s books and the bank’s records.
bank reconciliation
Differences arise because of a time lag in recording transactions, called ____
timing differences
___ are cash receipts the bank has received and recorded but the company has not recorded on its books.
Credit memorandums
service charge
debit memorandum
are received from customers for payment of services rendered or merchandise sold that have turned out to be worthless.
Nonsufficient funds (N S F) checks
cash ratio
(cash + cash equicalents) / total current liabitlies
