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Chapter 5 Chapter 5 Sarbanes-Oxley, Internal Sarbanes-Oxley, Internal Control, and Cash Control, and Cash
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Page 1: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Chapter 5Chapter 5

Sarbanes-Oxley, Internal Sarbanes-Oxley, Internal Control, and CashControl, and Cash

Sarbanes-Oxley, Internal Sarbanes-Oxley, Internal Control, and CashControl, and Cash

Page 2: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning ObjectivesLearning Objectives

After studying this chapter, you should be able to… Describe the Sarbanes-Oxley Act of 2002 and its impact on

internal controls and financial reporting Describe and illustrate the objectives and elements of internal

control Describe and illustrate the application of internal controls to cash Describe the nature of a bank account and its use for controlling

cash Describe and illustrate the use of a bank reconciliation in

controlling cash Describe the accounting for special-purpose cash funds Describe and illustrate the reporting of cash and cash equivalents

in the financial statements

Page 3: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 1Learning Objective 1

Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial reporting

Page 4: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Sarbanes-Oxley Act of 2002

Page 5: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 2Learning Objective 2

Describe and illustrate the objectives and elements of internal control

Page 6: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Objectives of Internal Control

Page 7: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Elements of Internal Control

• Control environment• Risk assessment• Control procedures• Monitoring• Information and communication

Page 8: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Control Environment

Page 9: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Risk Assessment

Identifies risks so management can

take steps to control them

Page 10: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Control Procedures

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Monitoring

• Locates weaknesses and improves control effectiveness

• Includes on-going efforts and separate evaluations

Page 12: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Information and Communication

Risk Risk AssessmentAssessment

ControlControlEnvironmentEnvironment

MonitoringMonitoring

ControlControlProceduresProcedures

Page 13: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Limitations of Internal Controls

Human ElementsHuman Elements Cost / Benefit of SystemCost / Benefit of System

Page 14: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 3Learning Objective 3

Describe and illustrate the application of internal controls to cash

Page 15: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

The Nature of Cash

• Coins

• Currency

• Checks

• Money Orders

• Money on Deposit

Page 16: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Cash Received from Sales

Page 17: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Cash Received in the Mail

Remittance AdviceRemittance Advice

Person Opening MailPerson Opening Mail

CheckCheck DepositDeposit

Page 18: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Cash Received by EFT

Company BankCompany BankCustomer BankCustomer Bank

Page 19: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Control Over Cash Payments

VoucherVoucher

Check issued toCheck issued tovendorvendor

Approved voucher Approved voucher entered to Systementered to System

Invoice, Invoice, Purchase Order, andPurchase Order, and

Receiving ReportReceiving Report

Page 20: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 4Learning Objective 4

Describe the nature of a bank account and its use for controlling cash

Page 21: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Nature of a Bank account and its use for controlling cash

Page 22: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 5Learning Objective 5

Describe and illustrate the use of a bank reconciliation in controlling

cash

Page 23: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Bank Statement Reconciliation

Page 24: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Steps in the Reconciliation Process

Page 25: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 6Learning Objective 6

Describe the accounting for special-purpose cash funds

Page 26: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Special Purpose Cash Funds – Petty Cash

Page 27: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

Learning Objective 7Learning Objective 7

Describe and illustrate the reporting of cash and cash equivalents in the

financial statements

Page 28: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

NetSolutions - Sales Transactions

Page 29: Chapter 5 Sarbanes-Oxley, Internal Control, and Cash.

End of Chapter 5End of Chapter 5