Cash, Fraud, and Internal Control: Chapter 6

These flashcards cover key terms and concepts from Chapter 6 of 'Cash, Fraud, and Internal Control', providing definitions to help with exam preparation.

Internal Control

A system used to monitor and control business activities to protect assets, ensure reliable accounting, uphold policies, and promote efficiency.

Sarbanes-Oxley Act (SOX)

Legislation requiring public company managers and auditors to document and certify internal controls, with penalties for violations.

Committee of Sponsoring Organizations (COSO)

An organization that outlines five components of internal control: control environment, risk assessment, control activities, information & communication, and monitoring.

Petty Cash Fund

A small cash fund used for minor expenses such as shipping fees and supplies, managed under a petty cash system.

Cash Over and Short

Accounting entries made to account for discrepancies between cash register records and actual cash counts.

Bank Reconciliation

A periodic process used to compare and explain the differences between the bank statement balance and the company's ledger cash balance.

Cash Equivalents

Short-term, highly liquid investments easily convertible to cash with minimal risk of value changes.

Documentation and Verification

Processes that involve confirming and approving transactions through specific documents to control cash payments.

Voucher System

A system that includes procedures for verifying, approving, and recording liabilities for eventual cash payments.

Fraud Triangle

A model explaining the factors that lead to fraud: opportunity, pressure, and rationalization.