Chapter 7- Fraud And Internal Control Flashcards
The three factors that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalization
Fraud Triangle
Is a dishonest act by an employee that results in personal benefits to the employee at a cost of the employer
Fraud
Law that requires publicly traded companies to maintain adequate systems of internal control
Sarbanes-Oxley Act (SOX)
All the related methods and measures adopted within an organization to safeguard assets and enhance the reliability of accounting records, increase efficiency of operations, and ensure compliance with law and regulations
Internal Controls
Company employees who continuously evaluate the effectiveness of the company’s internal control systems
Internal Auditors
Obtaining insurance protection against theft by employees
Bonding
The process of comparing the bank’s account balance with the company’s balance and explaining the differences to make them agree
Bank Reconciliation
A statement received monthly from the bank that shows the depositor’s bank transactions and balances
Bank Statement
Resources that consist of coins, currency, checks, money orders, and money on hand or on deposit in a bank or similar depository
Cash
A projection of anticipated cash flows, usually over a one- to two-year period
cash budget
short term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive to interest rates
cash equivalents
Deposits recorded by the bank depositor that have not been recorded by the bank
Deposits in Transit
A disbursement system that uses wire, telephone, or computer to transfer cash from one location to another
Electronic Funds Transfer
a check that is not paid by a bank because of insufficient funds in a bank account
NSF Check
Checks issued and recorded by a company but have not been paid by the bank
Outstanding checks
