Chapter 7

Question 1

The 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.

Answer 1

Internal Control

Question 2

A committee that provides thought
leadership related to enterprise risk
management, internal control, and
fraud deterrence

Answer 2

Committee of Sponsoring Organization

Question 3

A report by management describing its responsibility for and the
adequacy of internal controls over
financial reporting. A requirement by SOX

Answer 3

Internal Control Report

Question 4

What are the 5 components of internal control

Answer 4

1. Control Procedures
2. Risks Assessment
3. Information System
4. Monitoring of controls
5. Environment

Question 5

Dividing responsibilities between two or more people to limit fraud and promote the accuracy of accounting records

Answer 5

Separation of duties

Question 6

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

Answer 6

Encryption

Question 7

A device that enables members of a local network to access
the network, while keeping nonmembers out of the network

Answer 7

Firewall

Question 8

Two or more people working together to circumvent internal controls and defraud a company

Answer 8

Collusion

Question 9

An optional attachment to a check that tells the business the reason for the payment

Answer 9

remittance advise

Question 10

A procedure that compresses the
payment approval process into
a single step by comparing the
receiving report to the purchase
order.

Answer 10

Evaluated receipt settlement (ERS)

Question 11

A streamlined process that bypasses paper documents altogether. Computers of customers
communicate directly with the computers of suppliers to automate
routine business transactions

Answer 11

EDI, Electronic Data Interchange

Question 12

A card that shows each authorized person’s signature for a bank
account.

Answer 12

Signature card

Question 13

A document that instructs a bank to pay the designated person or
business a specified amount of money.

Answer 13

Check

Question 14

A bank form that is completed by the customer and shows the
amount of each deposit.

Answer 14

Deposit ticket

Question 15

On a check, the 9-digit number that identifies the bank upon which the
payment is drawn

Answer 15

Routing number

Question 16

A system that transfers cash by electronic communication rather
than by paper documents.

Answer 16

Electronic funds transfer

Question 17

A document explaining the reasons for the difference between a
depositor’s cash records and the depositor’s cash balance in its bank
account

Answer 17

Bank reconciliation

Question 18

Difference that arises between the balance on the bank statement and
the balance on the company’s books
because of a time lag in recording transactions

Answer 18

Timing Difference

Question 19

A deposit recorded by the company but not yet by its bank.

Answer 19

Deposit in transit

Question 20

A check issued by a company and recorded on its books but not yet
paid by its bank

Answer 20

Outstanding check

Question 21

An increase in a bank account.

Answer 21

Credit memorandum