Chapter 7 - Chapter 7 Questions 2. The Sarbanes-Oxley Act...

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Chapter 7 Questions 2. The Sarbanes-Oxley Act requires that a company develop sound principles of control over financial reporting and continually verify that these controls are working. The act specifically requires top management to attest that the company’s internal controls are reliable and effective. In order to achieve and maintain the required level of control, all employees must be educated with regard to internal control principles and evaluated for compliance with expected procedures on a regular basis. 13. Cash registers are readily visible to the customer. Thus, they prevent the sales clerk from ringing up a lower amount and pocketing the difference. In addition, the customer receives an itemized receipt, and the cash register tape is locked into the register for further verification. 15. True. Payment by check contributes to effective internal control over cash disbursements. However, effective control is also possible when small payments are made from petty cash. 20. The lack of agreement between the balances may be due to either: (1) Time lags—a check written in July does not clear the bank until August. (2) Errors—a check for $110 is recorded by the depositor as $101. 22. (a) An NSF check occurs when the checkwriter’s bank balance is less than the amount of the check. (b) In a bank reconciliation, a customer’s NSF check is deducted from the balance per books. (c) An NSF check results in an adjusting entry in the company’s books, as a debit to Accounts Receivable and a credit to Cash.
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Brief Exercises BRIEF EXERCISE 7-10 Elizondo Company should report cash in bank and payroll bank account as current assets. Plant expansion fund cash should be reported as a non-current asset, assuming the fund is not expected to be used during the next year.
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Exercises EXERCISE 7-3 (a)
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This note was uploaded on 04/18/2008 for the course ACC 011 taught by Professor Rosario during the Spring '08 term at Fairfield.

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Chapter 7 - Chapter 7 Questions 2. The Sarbanes-Oxley Act...

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