ACCT 211 Chapter 5: Chapter 5 Fact Sheet

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tealraccoon797

19 Jul 2016

School

Binghamton University

Department

Accounting

Course

ACCT 211

Professor

Elliot Kamlet

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Document Summary

Internal control report: an assessment of the effectiveness of internal controls; must include: a statement of management"s responsibility to establish and maintain internal controls, an assessment of the effectiveness of the internal controls. Sarbanes oxley act of 2002 (sox): meant to restore the public"s confidence in financial reporting, requires both a management report on internal controls and an annual audit of a company"s internal control structure by a third-party. Internal control integrated framework (coso): framework for what good internal control looks like. Bank reconciliation steps (in order from top to bottom): Outstanding checks: are checks that the company has written to pay someone (whether it"s a bank loan or a vendor) that hasn"t cleared the bank (maybe the vendor hasn"t processed it). This means the bank balance must be adjusted for the checks that haven"t cleared, thus the bank subtracts them from the cash balance since they will clear soon.

Related Questions

Inaccurate and unreliable information can spell financial disaster for businesses and persons who use this information for decision-making purposes. From the standpoint of a business, accurate and reliable information is necessary in order for a potential investor to have when they are considering investing with the company. If the information is not accurate and reliable, this will potentially harm the investor. Inaccurate financial information may be due to the incompetence of the accountant who prepared the financial statements or due to dishonesty and an attempt to conceal information. Internal control is the system of policies and procedures that a company puts in place to provide reasonable assurances that: The companyâs operations are effective and efficient The companyâs financial reporting is reliable, and The company is complying with applicable laws and regulations

1. In your first post, respond to the following questions:

a. How can a business ensure that the employee who is preparing the financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to be sure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in your work? This may include your schoolwork or the work that you do for your employer.

Inaccurate and unreliable information can spell financialdisaster for businesses and persons who use this information fordecision-making purposes. From the standpoint of a business,accurate and reliable information is necessary in order for apotential investor to have when they are considering investing withthe company. If the information is not accurate and reliable, thiswill potentially harm the investor. Inaccurate financialinformation may be due to the incompetence of the accountant whoprepared the financial statements or due to dishonesty and anattempt to conceal information.

Internal control is the system of policies and procedures that acompany puts in place to provide reasonable assurances that:

The companyâs operations are effective and efficient

The companyâs financial reporting is reliable, and

The company is complying with applicable laws andregulations

1. In your first post, respond to the followingquestions:

a. How can a business ensure that the employee who is preparingthe financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to besure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in yourwork? This may include your schoolwork or the work that you do foryour employer.

1â28. Multiple Choice Questions
Select the best answer for each of the following items and give reasons for your choice.
a. Which of the following best describes the relationship between assurance services and
attest services?
(1) While attest services involve fi nancial data, assurance services involve nonfi nancial data.
(2) While attest services require objectivity, assurance services do not require objectivity.
(3) Both attest and assurance services require independence.
(4) Attest and assurance services are different terms referring to the same types of services.
b. Which of the following has primary responsibility for the fairness of the representations
made in fi nancial statements?
(1) Clientâs management.
(2) Independent auditor.
(3) Audit committee.
(4) AICPA.
c. The most important benefi t of having an annual audit by a public accounting fi rm is to:
(1) Provide assurance to investors and other outsiders that the fi nancial statements are reliable.
(2) Enable offi cers and directors to avoid personal responsibility for any misstatements in
the fi nancial statements.
(3) Meet the requirements of government agencies.
(4) Provide assurance that illegal acts, if any exist, will be brought to light.
d. The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board
(PCAOB). Which of the following is not one of the responsibilities of that board?
(1) Establish independence standards for auditors of public companies.
(2) Review fi nancial reports fi led with the SEC.
(3) Establish auditing standards for audits of public companies.
(4) Sanction registered audit fi rms.
e. Which of these organizations has the responsibility to perform inspections of auditors of
public companies?
(1) American Institute of Certifi ed Public Accountants.
(2) Securities and Exchange Commission.
(3) Financial Accounting Standards Board.
(4) Public Company Accounting Oversight Board.
f. Governmental auditing, in addition to including audits of fi nancial statements, often
includes audits of effi ciency, effectiveness, and:
(1) Adequacy.
(2) Evaluation.
(3) Accuracy.
(4) Compliance.
g. In general, internal auditorsâ independence will be greatest when they report directly to the:
(1) Financial vice president.
(2) Corporate controller.
(3) Audit committee of the board of directors.
(4) Chief executive offi cer.
h. Which of the following did not precipitate the passage of the Sarbanes-Oxley Act of 2002
to regulate public accounting fi rms:
(1) Disclosures related to accounting irregularities at Enron and WorldCom.
(2) Restatements of fi nancial statements by a number of public companies.

(3) Conviction of the accounting fi rm of Arthur Andersen LLP.
(4) Ethical scandals at the AICPA.
i. Which of the following organizations establishes accounting standards for U.S. government
agencies?
(1) The Financial Accounting Standards Board.
(2) The Governmental Accounting Standards Board.
(3) The Federal Accounting Standards Advisory Board.
(4) The Public Company Accounting Oversight Board.
j. Which of the following is correct about forensic audits?
(1) All audit engagements are forensic in nature.
(2) Forensic audits are performed by law fi rms; they are not performed by CPA fi rms.
(3) Forensic audits are equivalent to compliance audits.
(4) Forensic audits are usually performed in situations in which fraud has been found or is
suspected.
k. What best describes the purpose of the auditorsâ consideration of internal control in a
fi nancial statement audit for a nonpublic company?
(1) To determine the nature, timing, and extent of audit testing.
(2) To make recommendations to the client regarding improvements in internal control.
(3) To train new auditors on accounting and control systems.
(4) To identify opportunities for fraud within the clientâs operations.
l. Which of the following is an example of a compliance audit?
(1) An audit of fi nancial statements.
(2) An audit of a companyâs policies and procedures for adhering to environmental laws
and regulations.
(3) An audit of a companyâs internal control over fi nancial reporting.
(4) An audit of the effi ciency and effectiveness of a companyâs legal department.

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ACCT 211 Chapter 5: Chapter 5 Fact Sheet

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