Dr. Phil
a check that has been issued and recorded by the business but that has not been “cashed” by the recipient of the check.
outstanding check
threats to the internal processes of a company.
business process risks
fees charged by the bank for services provided. Examples include annual maintenance, minimum balance, and foreign transaction fees.
service charges
this statement shows the sources and uses of cash during the accounting period.
an account that records the discrepancies between deposited amounts of actual cash received and the total of the cash register tape.
cash over/short account
a fund used to pay for small dollar amounts.
petty cash
the methods and records used to identify, measure, record, and communicate financial information about a business.
accounting system
short-term, highly liquid investments that are readily convertible to cash and have original maturities of three months or less.
cash equivalents
an amount received and recorded by a company, but which has not been recorded by the bank in time to appear on the current bank statement.
deposit-in-transit
possible threats to the organization’s success in accomplishing its objectives that are external to the organization.
strategic risks
the process of reconciling any differences between a company’s accounting records and the bank’s accounting records.
bank reconciliation
the policies and procedures that top management establishes to help insure that its objectives are met.
control activities
the idea that accounting and administrative duties should be performed by different individuals, so that no one person has access to the asset and prepares all the documents and records for an activity.
segregation of duties
the policies and procedures established by top management and the board of directors to provide reasonable assurance that the company’s objectives are being met in three areas: (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, and (3) compliance with applicable laws and regulations.
internal control system
What is the primary role of internal controls in managing a business?
To prevent cash from being stolen
To ensure that the financial statements are presented in such a manner as to provide relevant and reliable information for financial statement users and the company’s creditors
To constrain subordinates’ activities in order to prevent employees from deviating from the scope of their responsibilities and encouraging them to act in the best interest of the business
To encourage theft and to ensure that segregation of duties does not take place
c. To constrain subordinates’ activities in order to prevent employees from deviating from the scope of their responsibilities and encouraging them to act in the best interest of the business
the collection of environmental factors that influence the effectiveness of control procedures such as the philosophy and operating style of management, the personnel policies and practices of the business, and the overall integrity, attitude, awareness, and actions of everyone in the business concerning the importance of control.
control environment
Which of the following is not one of the three areas for which internal control systems are intended to provide reasonable assurance?
Reliability of financial reporting
Compliance with applicable laws and regulations
Effectiveness and efficiency of operations
Certification that the financial statements are without error
d. Certification that the financial statements are without error
a check that has been returned to the depositor because funds in the issuer’s account are not sufficient to pay the check (also called a “bounced” check).
NSF check (non-sufficient funds)
Allowing only certain employees to order goods and services for the company is an example of what internal control procedure?
Adequate documents and records
Clearly defined authority and responsibility
Safeguarding of assets and records
Checks on recorded amount
b.Clearly defined authority and responsibility
the physical protection of assets through, for example, fireproof vaults, locked storage facilities, keycard access, and anti-theft tags on merchandise.
safeguarding