Practice | Discuss Management Responsibilities for Maintaining Internal Controls within an Organization

Q1 | Which of the following is true about the Sarbanes-Oxley Act?

It was passed to ensure that internal controls are properly documented and tested by public companies.

It applies to both public and smaller companies.

It requires all companies to report their internal control policies to the US Securities and Exchange Commission.

It does not require additional costs or resources to have adequate controls.

Q2 | The external auditor of a company has certain requirements due to Sarbanes-Oxley. Which of the following best describes these requirements?

The auditor is required to only report weaknesses in the internal control design of the company he or she is auditing.

The auditor must issue an internal control report on the evaluation of internal controls overseen by the Public Company Accounting Oversight Board

The auditor in charge can serve for a period of only two years.

The Public Company Accounting Oversight Board reviews reports submitted by the auditors when no evaluations have been performed.

Q3 | Petty cash is used to ________.

write checks for frequent purchases

make small payments in cash

avoid having to retain receipts because the amounts are very small

avoid having to get approvals due to the small amount of cash being paid

Q4 | A company has decided to start a petty cash fund for $150. Which of the following is the correct journal entry?

Debit: Petty Cash $150, Credit: Cash $150

Debit: Cash $150, Credit: Petty Cash $150

No entry is required.

Debit: Expenses $150, Credit: Petty Cash $150

Principles of Accounting Volume 1: Financial Accounting