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Match the accounting terminology to the definitions.

1. Sarbanes-Oxley Act

2. Internal control

3. Encryption

4. Separation of duties

5. Internal auditors

a. Organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting records.

b. Employees of the business who ensure that the company’s employees are following company policies and meeting legal requirements and that operations are running efficiently.

c. Rearranging plain-text messages by a mathematical process—the primary method of achieving security in e-commerce.

d. Requires companies to review internal control and take responsibility for the accuracy and

completeness of their financial reports.

e. Dividing responsibilities between two or more people.

Short Answer

Expert verified

Answer :

  1. (d)
  2. (a)
  3. (c)
  4. (e)
  5. (b)

Step by step solution

01

Meaning of Accounting Terminology:

Accounting terminology refers to the specific word or terms used in the field of accounting.

02

Correct option

S.No.

Terminology

Definitions

1

Sarbanes-Oxley Act

(d)The Sarbanes-Oxley act is the act that requires companies to review internal control and takes responsibility for the accuracy and completeness of their financial reports.

2

Internal Control

(a) Internal control is an organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational, efficiency and ensure accurate and reliable accounting records

3

Encryption

(c) Encryption means rearranging plain-text messages by a mathematical process—the primary method of achieving security in e-commerce.

4

Separation of Duties

(e)The separation of duties is dividing responsibilities between two or more people.

5

Internal Auditors

(b)Internal auditors are the employees of the business who ensure that the company’s employees are following company policies and meeting legal requirements and that operations are running efficiently

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Most popular questions from this chapter

Correcting internal control weaknesses

Each of the following situations has an internal control weakness.

a. Jade Applications has decided that one way to cut costs in the upcoming year is to

fire the external auditor. The business believes that the internal auditor should be

able to efficiently monitor the company’s internal controls.

b. In an effort to minimize the amount of paperwork, Ross Homes has decided that it

will not keep copies of customer invoices related to sales revenue. Ross believes that

this effort will minimize the amount of data storage the company will have to pay for.

c. Elle Bee, a trusted employee for many years, has never taken a vacation. The owner

believes that he’s lucky that she is so committed to her job.

d. The Medicine Chest Company keeps a small petty cash fund to handle small cash

transactions. Because no one wants to volunteer to be the custodian, the business

manager has decided that all employees should have access to the petty cash. She

figures that as long as each employee fills out a petty cash ticket, then there are

proper controls in place.

e. Due to the cost of maintaining the security cameras, Wings and More has decided

that it will remove the cameras that monitor the cash register.

f. Bryan Miller, manager of Hardware Emporium, prides himself on hiring

exceptionally skilled employees who need no training to do their jobs.

Requirements

1. Identify the missing internal control characteristics in each situation.

2. Identify the possible problem caused by each control weakness.

3. Propose a solution to each internal control problem.

Fill in the missing information concerning how companies control cash received by mail.

a. The ________ opens the mail and sends customer checks to the treasurer.

b. The ________ deposits the customer checks in the bank.

c. The ________ uses the remittance advices to record the journal entries for cash receipts.

d. The ________ compares the bank deposit to the journal entry for cash receipts.

Why is it necessary to record journal entries after the bank reconciliation has been prepared? Which side of the bank reconciliation requires journal entries?

Applying internal control over cash receipts Sandra Kristof sells furniture for McKinney Furniture Company. Kristof has financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?

What are the five components of internal control? Briefly explain each component.

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