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Chapter 7: Q1TI (page 386)

Match the accounting terminology to the definitions.

1. Sarbanes-Oxley Act

2. Internal control

3. Encryption

4. Separation of duties

5. Internal auditors

a. 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.

b. Employees of the business who ensure that the company鈥檚 employees are following company

policies and meeting legal requirements and that operations are running efficiently.

c. Rearranging plain-text messages by a mathematical process鈥攖he primary method of

achieving security in e-commerce.

d. Requires companies to review internal control and take responsibility for the accuracy and

completeness of their financial reports.

e. Dividing responsibilities between two or more people.

Short Answer

Expert verified

Separation of duties means dividing the responsibility of the employees.

Step by step solution

01

Step-by-Step SolutionStep 1: Meaning of internal controls

Internal control is an internal process in which the company controls its internal activities.

02

Correct option

  1. Sarbanes-Oxley Act

d. The Sarbanes-Oxley act is the act that requires companies to review internal control and takes responsibility for the accuracy and

completeness of their financial reports.

2. Internal Control

a. Internal control is an 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.

3.Encryption

c. Encryption means rearranging plain-text messages by a mathematical process鈥攖he primary method of achieving security in e-commerce.

4.Separation of Duties

e. The separation of duties is dividing responsibilities between two or more people.

5.Internal Auditors

b. Internal auditors are the employees of the business who ensure that the company鈥檚 employees are following company

policies and meeting legal requirements and that operations are running efficiently

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Most popular questions from this chapter

List internal control procedures related to e-commerce.

What are some common controls used with a bank account?

The following petty cash transactions of Green Golf Equipment occurred in May:

May 1 Established a petty cash fund with a \(200 balance.

31 The petty cash fund has \)18 in cash and \(180 in petty cash tickets that were issued to pay for Office Supplies(\)81), Delivery Expense (\(36), Postage Expense (\)54), and Miscellaneous Expense ($9).

The petty cash custodianreplenished the fund and recorded the expenses.

Prepare the journal entries.

Preparing a bank reconciliation and journal entries

The August 31 bank statement of Well Healthcare has just arrived from United Bank.

To prepare the bank reconciliation, you gather the following data:

a. The August 31 bank balance is \(4,540.

b. The bank statement includes two charges for NSF checks from customers. One is

for \)380 (#1), and the other is for \(180 (#2).

c. The following Well Healthcare checks are outstanding at August 31:

Check No. Amount

237 \) 80

288 190

291 570

294 600

295 30

296 70

d. Well collects from a few customers by EFT. The August bank statement lists a

\(1,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Well hasn鈥檛 recorded yet:

\)800 for dividend revenue, and \(120 for the interest revenue Well earned on its

bank balance during August.

f. The bank statement lists a \)50 subtraction for the bank service charge.

g. On August 31, the Well treasurer deposited \(260, but this deposit does not appear

on the bank statement.

h. The bank statement includes a \)1,050 deduction for a check drawn by Multi-State

Freight Company. Well notified the bank of this bank error.

i. Well鈥檚 Cash account shows a balance of $2,800 on August 31.

Requirements

1. Prepare the bank reconciliation for Well Healthcare at August 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include anexplanation for each entry.

Applying internal control over cash payments by check

A purchasing agent for Franklin Office Supplies receives the goods that he purchases

and also approves payment for the goods.

Requirements

1. How could this purchasing agent cheat his company?

2. How could Franklin avoid this internal control weakness?
See all solutions

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