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
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
Learning Objective 1Learning Objective 1
Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial reporting
Sarbanes-Oxley Act of 2002
Learning Objective 2Learning Objective 2
Describe and illustrate the objectives and elements of internal control
Objectives of Internal Control
Elements of Internal Control
• Control environment• Risk assessment• Control procedures• Monitoring• Information and communication
Control Environment
Risk Assessment
Identifies risks so management can
take steps to control them
Control Procedures
Monitoring
• Locates weaknesses and improves control effectiveness
• Includes on-going efforts and separate evaluations
Information and Communication
Risk Risk AssessmentAssessment
ControlControlEnvironmentEnvironment
MonitoringMonitoring
ControlControlProceduresProcedures
Limitations of Internal Controls
Human ElementsHuman Elements Cost / Benefit of SystemCost / Benefit of System
Learning Objective 3Learning Objective 3
Describe and illustrate the application of internal controls to cash
The Nature of Cash
• Coins
• Currency
• Checks
• Money Orders
• Money on Deposit
Cash Received from Sales
Cash Received in the Mail
Remittance AdviceRemittance Advice
Person Opening MailPerson Opening Mail
CheckCheck DepositDeposit
Cash Received by EFT
Company BankCompany BankCustomer BankCustomer Bank
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
Learning Objective 4Learning Objective 4
Describe the nature of a bank account and its use for controlling cash
Nature of a Bank account and its use for controlling cash
Learning Objective 5Learning Objective 5
Describe and illustrate the use of a bank reconciliation in controlling
cash
Bank Statement Reconciliation
Steps in the Reconciliation Process
Learning Objective 6Learning Objective 6
Describe the accounting for special-purpose cash funds
Special Purpose Cash Funds – Petty Cash
Learning Objective 7Learning Objective 7
Describe and illustrate the reporting of cash and cash equivalents in the
financial statements
NetSolutions - Sales Transactions
End of Chapter 5End of Chapter 5