DISCUSSION QUESTIONS
332 Chapter 7 Sarbanes-Oxley, Internal Control, and Cash
SELF-STUDY QUESTIONS Answers at end of chapter
- Which of the following is notan element of internal
control?
A. Control environment
B. Monitoring
C. Compliance with laws and regulations
D. Control procedures - The policies and procedures used by management to
protect assets from misuse, ensure accurate business
information, and ensure compliance with laws and reg-
ulations are called:
A. internal controls.
B. systems analysis.
C. systems design.
D. systems implementation. - In preparing a bank reconciliation, the amount of
checks outstanding would be:
A. added to the cash balance according to the bank
statement.
B. deducted from the cash balance according to the
bank statement. - (a) Why did Congress pass the Sarbanes-Oxley Act of 2002?
(b) What was the purpose of the Sarbanes-Oxley Act of 2002? - Defineinternal control.
- (a) Name and describe the five elements of internal con-
trol. (b) Is any one element of internal control more im-
portant than another? - How does a policy of rotating clerical employees from
job to job aid in strengthening the control procedures
within the control environment? Explain. - Why should the responsibility for a sequence of related
operations be divided among different persons? Explain. - Why should the employee who handles cash receipts not
have the responsibility for maintaining the accounts re-
ceivable records? Explain.
C. added to the cash balance according to the
company’s records.
D. deducted from the cash balance according to the
company’s records.- Journal entries based on the bank reconciliation are
required for:
A. additions to the cash balance according to the
company’s records.
B. deductions from the cash balance according to the
company’s records.
C. both A and B.
D. neither A nor B. - A petty cash fund is:
A. used to pay relatively small amounts.
B. established by estimating the amount of cash
needed for disbursements of relatively small
amounts during a specified period.
C. reimbursed when the amount of money in the fund
is reduced to a predetermined minimum amount.
D. all of the above. - In an attempt to improve operating efficiency, one em-
ployee was made responsible for all purchasing, receiv-
ing, and storing of supplies. Is this organizational change
wise from an internal control standpoint? Explain. - The ticket seller at a movie theater doubles as a ticket
taker for a few minutes each day while the ticket taker is
on a break. Which control procedure of a business’s sys-
tem of internal control is violated in this situation? - Why should the responsibility for maintaining the
accounting records be separated from the responsibility
for operations? Explain. - Assume that Julee Shiver, accounts payable clerk for
Galaxy Inc., stole $110,000 by paying fictitious invoices
for goods that were never received. The clerk set up
2.
Cash 1,240.00
Notes Receivable 1,000.00
Interest Revenue 30.00
Accounts Payable–Avery Equipment Company 210.00
Miscellaneous Administrative Expense 18.20
Cash 18.20