Chapter 4 Notes Flashcards
(274 cards)
1
Q
Internal Controls
A
Plans to safeguard assets and ensure accuracy.
2
Q
Incorrect Financial Statements
A
Results from errors or intentional fraud.
3
Q
Errors
A
Accidental mistakes in transaction recording.
4
Q
Fraud
A
Intentional deception for personal gain.
5
Q
Occupational Fraud
A
Misuse of occupation for personal enrichment.
6
Q
Fraud Triangle
A
Model explaining factors leading to fraud.
7
Q
Opportunity
A
Circumstances allowing fraud to occur.
8
Q
Motivation
A
Need prompting an individual to commit fraud.
9
Q
Rationalization
A
Justification for committing a fraudulent act.
10
Q
Sarbanes-Oxley Act of 2002
A
Legislation enhancing financial reporting standards.
11
Q
Public Company Accounting Oversight Board (PCAOB)
A
Authority establishing auditing standards and ethics.
12
Q
Corporate Executive Accountability
A
Executives must certify financial statements personally.
13
Q
Nonaudit Services
A
Prohibited services auditors cannot perform for clients.
14
Q
Financial Penalties
A
Severe consequences for fraudulent financial misstatements.
15
Q
Imprisonment
A
Potential punishment for willful violations of laws.
16
Q
Accounting Scandals
A
Events where companies misreport financial information.
17
Q
WorldCom
A
Company involved in significant accounting fraud.
18
Q
Enron
A
Company that misclassified expenditures to inflate profits.
19
Q
Internal Control Procedures
A
Guidelines for maintaining accurate financial reporting.
20
Q
Auditor-Client Relations
A
Standards governing interactions between auditors and clients.
21
Q
Securities and Exchange Commission (SEC)
A
U.S. agency overseeing securities markets and financial disclosures.
22
Q
Stewardship
A
Managers’ responsibility to protect company resources.
23
Q
Ethical Responsibilities
A
Obligations of managers to act with integrity.
24
Q
Auditor Rotation
A
Lead auditor must rotate every five years.
25
Audit Partner
The lead auditor responsible for a company's audit.
26
Conflicts of Interest
Situations where personal interests may affect objectivity.
27
Hiring of Auditor
Audit firms hired by audit committee, not management.
28
Internal Control
Processes ensuring accurate financial reporting and compliance.
29
Section 404
Requires assessment of internal control effectiveness.
30
Sarbanes-Oxley Act (SOX)
Legislation enhancing auditor-client relations and internal controls.
31
Executive Accountability
Corporate executives responsible for financial reporting accuracy.
32
Control Activities
Policies ensuring management directives are implemented.
33
Risk Assessment
Identifying risks that could hinder company objectives.
34
Control Environment
Overall ethical tone regarding internal controls.
35
Information & Communication
Methods for timely information sharing within the company.
36
Monitoring
Ongoing assessment of internal control effectiveness.
37
Authorizations
Approval processes for transactions and activities.
38
Reconciliations
Comparing records to ensure accuracy and completeness.
39
Separation of Duties
Dividing responsibilities to reduce risk of errors.
40
Disclosure Controls
Procedures ensuring accurate financial disclosures.
41
Financial Reporting
Process of preparing and presenting financial statements.
42
Audit Committee
Board members overseeing the audit process.
43
Public Companies
Companies required to file financial statements with SEC.
44
Chief Executive Officer (CEO)
Highest-ranking executive responsible for overall operations.
45
Chief Financial Officer (CFO)
Executive responsible for financial planning and reporting.
46
Reasonable Assurance
A level of confidence in achieving control objectives.
47
Disclosure Controls
Designed to provide reasonable assurance of objectives.
48
Internal Controls
Processes to prevent errors and fraud.
49
Control Environment
Management's attitudes affect internal control effectiveness.
50
Risk Assessment
Evaluation of internal and external risk factors.
51
Control Activities
Policies to protect company assets.
52
Monitoring
Ongoing evaluation of internal controls.
53
Information and Communication
Reliability depends on accounting information systems.
54
Separation of Duties
Dividing responsibilities to prevent fraud.
55
Physical Controls
Procedures to safeguard assets and records.
56
Proper Authorization
Ensures resources are used appropriately.
57
Employee Management
Guidance for employees to perform duties.
58
E-commerce Controls
Procedures for authorized online transactions.
59
Reconciliations
Periodic checks of physical assets against records.
60
Performance Reviews
Comparison of actual performance to expectations.
61
Audits
Independent assessment of internal controls.
62
Top Executives
Final responsibility for internal control effectiveness.
63
COSO Criteria
Framework for assessing internal control effectiveness.
64
Preventative Controls
Measures to prevent errors before they occur.
65
Detective Controls
Measures to identify errors after they occur.
66
Internal Control Framework
Guidelines for establishing effective controls.
67
Management Responsibility
Everyone impacts internal control operations.
68
Accounting Records
Documentation of financial transactions and assets.
69
Fraud Detection
Identifying fraudulent behavior through audits.
70
Cash Receipts Control
Example of physical control for cash security.
71
Internal Control
Company's plan for accurate financial reporting.
72
COSO Criteria
Framework for evaluating internal control effectiveness.
73
Collusion
Coordination between individuals to bypass controls.
74
Top-Level Override
Ability of executives to bypass internal controls.
75
Control Environment
Foundation of an internal control system.
76
Risk Assessment
Identifying and analyzing potential risks.
77
Control Activities
Procedures to prevent or detect errors.
78
Information and Communication
Sharing relevant information for effective controls.
79
Financial Misstatements
Errors in financial reporting despite controls.
80
Ethical Employees
Workers who adhere to moral principles.
81
CEO and CFO Responsibility
Executives must assess internal control adequacy.
82
Cash
Physical currency and balances in accounts.
83
Cash Equivalents
Investments maturing within three months.
84
Money Market Funds
Short-term investment funds for cash equivalents.
85
Treasury Bills
Government securities maturing in less than a year.
86
Certificates of Deposit
Time deposits with fixed maturity dates.
87
Credit Card Sales
Sales transactions processed via credit cards.
88
Debit Card Sales
Sales transactions processed via debit cards.
89
Checks Received
Payments received in the form of checks.
90
Total Cash Balance
Sum of all cash and cash equivalents.
91
Final Responsibility
Top executives are accountable for internal controls.
92
Effective Internal Controls
Systems that help prevent financial inaccuracies.
93
Cash Equivalent
Assets easily convertible to cash within 3 months.
94
Cash Receipts
Money received from customers via various methods.
95
Electronic Funds Transfer (EFT)
Digital transfer of money between accounts.
96
Prepaid Cards
Cards loaded with funds for future purchases.
97
Cryptocurrencies
Digital currencies using cryptography for transactions.
98
Mail Opening Procedure
Daily listing of received cash and checks.
99
Deposit Control
Separate employee deposits cash to prevent fraud.
100
Cash Receipt Recording
Immediate recording of cash receipts in accounts.
101
Credit Card Acceptance
Reduces cash handling by employees during sales.
102
Service Fees
Charges deducted by credit card companies from sales.
103
Debit Card Functionality
Withdraws funds directly from bank account instantly.
104
Retailer Fees
Costs incurred by retailers for processing debit transactions.
105
Common Mistake in Accounting
Debit card decreases cash, not increases it.
106
Cash Disbursement Controls
Procedures to manage outgoing cash effectively.
107
Authorized Expenditures
Approval required before any purchase is made.
108
Check Serial Numbering
Checks must be numbered for tracking purposes.
109
Two Signature Requirement
Larger checks need signatures from two authorized persons.
110
Cash Handling Limitation
Use cards to limit physical cash transactions.
111
Payment Authorization
Verification of purchase accuracy before payment.
112
Recording Credit Sales
Documenting sales and service fees in accounts.
113
Debit Card Confusion
Debit cards decrease company's cash liability.
114
Payment Methods
Includes cash, checks, cards, and digital payments.
115
Customer Payment Types
Variety of methods customers use to pay.
116
Debit Card Statement
Monthly summary of debit card transactions.
117
Credit Card Statement
Monthly summary of credit card transactions.
118
Purchase Receipts
Documents verifying purchase transactions made.
119
Separation of Duties
Dividing responsibilities to reduce fraud risk.
120
Maximum Purchase Limits
Set spending caps for debit and credit cards.
121
Upper-Level Approval
Required consent for purchases exceeding set limits.
122
Cash Disbursements
Payments made by cash, check, or card.
123
Advertising Expense
Cost incurred for promoting business activities.
124
Accounts Payable
Liability for purchases made on credit.
125
Bank Reconciliation
Process of matching bank and company cash records.
126
Timing Differences
Discrepancies from recording transactions at different times.
127
Errors in Records
Mistakes in cash records by company or bank.
128
Independent Verification
Third-party confirmation of cash receipts accuracy.
129
Cash Receipts Controls
Procedures to safeguard incoming cash transactions.
130
Payment Methods
Forms of settling transactions: cash, check, card.
131
Documentation Procedures
Required records for financial transactions and approvals.
132
Internal Control System
Framework to safeguard assets and ensure accuracy.
133
Employee Fraud Risk
Potential for dishonest actions involving cash assets.
134
Cash Asset Susceptibility
Vulnerability of cash to theft or mismanagement.
135
Cash Balance Discrepancy
Mismatch between company and bank cash records.
136
Accidental Errors
Unintentional mistakes in financial documentation.
137
Intentional Errors
Deliberate inaccuracies in financial reporting.
138
Cash Receipts
Money received by the company during a period.
139
Cash Disbursements
Money spent by the company during a period.
140
Beginning Cash Balance
Cash available at the start of the period.
141
Ending Cash Balance
Cash available at the end of the period.
142
EFT
Electronic funds transfer for payments.
143
Sales
Revenue generated from selling goods or services.
144
Bank Statement
Monthly summary of account transactions from the bank.
145
Deposits and Credits
Funds added to the account, increasing balance.
146
Withdrawals and Debits
Funds taken from the account, decreasing balance.
147
Outstanding Deposits
Deposits not yet recorded by the bank.
148
Outstanding Checks
Checks issued but not yet cleared by the bank.
149
Bank Reconciliation
Process of matching bank statement with company records.
150
Common Mistake
Misinterpretation of debit and credit terminology.
151
Debit Card (DC)
Card used for electronic payments directly from account.
152
Nonsufficient Funds (NSF)
Insufficient balance to cover a transaction.
153
Service Fees (SF)
Charges applied by the bank for account maintenance.
154
Interest Earned (INT)
Money earned on account balance over time.
155
Note Collected
Funds collected on behalf of the company.
156
Bank Errors
Mistakes made by the bank in account transactions.
157
Cash Account
Record of cash transactions for the company.
158
Memo
Notes attached to transactions for reference.
159
Repairs
Expenses incurred for maintaining or fixing assets.
160
Insurance
Cost of coverage against potential future losses.
161
Bank Collections
Funds collected by the bank for the company.
162
Interest Earned
Income from average daily cash balance.
163
Electronic Funds Transfers (EFTs)
Digital transfer of funds between accounts.
164
NSF Checks
Checks from customers with insufficient funds.
165
Debit Card Purchases
Transactions made using a debit card.
166
Bank Service Fees
Charges applied by the bank for services.
167
Company Errors
Mistakes made in recording transactions.
168
Outstanding Deposits
Deposits not yet reflected in bank statement.
169
Cash Increases
Funds added to the company's cash balance.
170
Cash Decreases
Funds deducted from the company's cash balance.
171
Bank Reconciliation
Process of aligning bank and company cash records.
172
Company's Cash Balance
Cash amount recorded in the company's books.
173
Bank's Cash Balance
Cash amount reported by the bank statement.
174
Deposits Outstanding
Deposits made but not yet processed by the bank.
175
Checks Outstanding
Checks issued but not yet cleared by the bank.
176
Service Fee
Charge deducted by the bank for account maintenance.
177
Corrected Advertising Expense
Adjustment made to rectify an expense error.
178
Note Received
Loan or payment received, increasing cash balance.
179
NSF Check Adjustment
Cash balance reduced due to bounced customer check.
180
Account Receivable
Amount owed by customers for goods/services provided.
181
Common Mistake
Misunderstanding of NSF checks as company checks.
182
Cash Receipts
Total cash collected by the company.
183
Cash Disbursements
Total cash paid out by the company.
184
NSF Check
A check returned due to insufficient funds.
185
Cash Account Update
Adjusting cash balance for reconciliation items.
186
Debit Cash
Increase cash balance in accounting records.
187
Credit Cash
Decrease cash balance in accounting records.
188
Outstanding Deposits
Deposits recorded by company, not yet by bank.
189
Outstanding Checks
Checks issued but not yet cleared by bank.
190
Bank Errors
Mistakes made by the bank affecting balance.
191
Company Errors
Mistakes made by the company affecting balance.
192
Miscellaneous Expense
Recorded when discrepancies cannot be resolved.
193
Miscellaneous Revenue
Recorded for positive discrepancies in cash balance.
194
Timing Differences
Discrepancies due to timing of transactions.
195
Bank Statement
Official record of transactions from the bank.
196
General Ledger
Company's comprehensive accounting record.
197
Reconciliation Schedule
Document comparing bank and company cash balances.
198
Interest Received
Earnings credited to the company's account by bank.
199
Service Fee Expense
Fees charged by the bank for services.
200
Utilities Expense
Costs incurred for utility services.
201
Advertising Expense
Costs associated with promoting the business.
202
Accounts Receivable
Money owed to the company by customers.
203
Notes Receivable
Written promises for payment from customers.
204
Cash Balance Per Reconciliation
Final adjusted cash balance after reconciliation.
205
Correction for Rent
Adjustment made for rent discrepancies.
206
NSF Check
Non-sufficient funds check from a customer.
207
Accounts Receivable
Money owed by customers for goods/services.
208
Petty Cash Fund
Small cash amount for minor purchases.
209
Establishing Petty Cash
Setting up a petty cash fund with cash withdrawal.
210
Debit Card
Card used for direct bank account payments.
211
Credit Card
Card allowing deferred payment for purchases.
212
Bank Reconciliation
Process of matching bank statement with records.
213
Employee Purchases
Expenditures made by employees on behalf of company.
214
Replenishing Petty Cash
Refilling petty cash fund after expenditures.
215
Employee Expenditures
Purchases made by employees using company funds.
216
Internal Controls
Procedures to ensure proper handling of funds.
217
Receipts Requirement
Employees must provide proof of purchases.
218
Spending Limits
Maximum allowable spending for employees with cards.
219
Pre-Approval
Required authorization for major expenditures.
220
Credit Card Reconciliation
Matching receipts to credit card statements.
221
Expense Recognition
Recording expenditures in accounting records.
222
Cash Adjustment
Modifying cash balance due to NSF checks.
223
Company-Issued Cards
Cards provided by company for employee purchases.
224
Expenditure Justification
Reasoning provided for employee purchases.
225
Formal Purchasing Procedures
Official methods for approving large purchases.
226
Accounting for Expenditures
Recording and categorizing employee purchases.
227
Total Employee Purchases
Sum of all expenditures made by employees.
228
Cash Account Credit
Reducing cash balance in accounting records.
229
Expense Categories
Different types of expenses recorded in accounting.
230
Cash Inflows
Money received by a business during a period.
231
Cash Outflows
Money spent by a business during a period.
232
Operating Activities
Cash transactions involving revenues and expenses.
233
Investing Activities
Cash transactions for long-term asset investments.
234
Financing Activities
Cash transactions for borrowing and owner investments.
235
Statement of Cash Flows
Financial report detailing cash inflows and outflows.
236
Net Cash Flows
Total cash inflows minus total cash outflows.
237
Current Asset
Cash or assets expected to be converted to cash within a year.
238
Noncurrent Asset
Assets not expected to be converted to cash within a year.
239
Cash at Beginning
Cash balance at the start of the reporting period.
240
Cash at End
Cash balance at the end of the reporting period.
241
Revenue Activities
Cash inflows from core business operations.
242
Expense Activities
Cash outflows for operational costs.
243
Common Stock
Equity shares issued by a company to raise capital.
244
Cash Dividends
Payments made to shareholders from profits.
245
Equipment Purchase
Cash outflow for acquiring long-term assets.
246
Bank Borrowing
Cash inflow from loans taken from financial institutions.
247
Rent Payment
Cash outflow for leasing property or equipment.
248
Salary Payment
Cash outflow for employee compensation.
249
Training Revenue
Cash inflow from providing services to customers.
250
Advance Payments
Cash received for services to be rendered in the future.
251
Cash Flow Period
Time frame covered by the cash flow statement.
252
Snapshot of Cash
A financial overview at a specific point in time.
253
Long-term Assets
Assets held for more than one year.
254
Cash flows
Movement of cash in and out of a business.
255
Investing activities
Cash flows related to long-term asset transactions.
256
Financing activities
Cash flows from borrowing or repaying debt.
257
Operating activities
Cash flows from core business operations.
258
Cash and cash equivalents
Liquid assets available for immediate use.
259
Change in cash
Difference between beginning and ending cash balances.
260
Net cash flows
Total cash flow after all activities are considered.
261
Cash holdings
Total cash and cash equivalents owned by a company.
262
Noncash assets
Assets that do not have immediate cash value.
263
Cash ratio
Percentage of cash assets to noncash assets.
264
Live Nation Entertainment
Company with significant cash and cash equivalents.
265
AMC Networks
Company analyzed for cash flow comparison.
266
Operating cash flows
Cash generated from normal business operations.
267
Investing cash flows
Cash used for purchasing or selling assets.
268
Financing cash flows
Cash received from or paid to investors and creditors.
269
Foreign currency effects
Impact of currency exchange on cash flows.
270
Cash flow statement
Financial report detailing cash inflows and outflows.
271
Balance sheet
Snapshot of a company's financial position at a point.
272
Cash analysis
Evaluation of cash flow performance over time.
273
Cash assets
Assets that can be quickly converted to cash.
274
Idle resources
Excess cash not utilized for generating revenue.
