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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.
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