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

2. Learning 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

3. Learning Objective 1 Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial reporting

4. Sarbanes-Oxley Act of 2002

5. Learning Objective 2 Describe and illustrate the objectives and elements of internal control

6. Objectives of Internal Control

7. Elements of Internal Control Control environment Risk assessment Control procedures Monitoring Information and communication

8. Control Environment

9. Risk Assessment Identifies risks so management can take steps to control them

10. Control Procedures

11. Monitoring Locates weaknesses and improves control effectiveness Includes on-going efforts and separate evaluations

12. Information and Communication Risk Assessment ControlEnvironment Monitoring ControlProcedures

13. Limitations of Internal Controls Human Elements Cost / Benefit of System

14. Learning Objective 3 Describe and illustrate the application of internal controls to cash

15. The Nature of Cash Coins Currency Checks Money Orders Money on Deposit

16. Cash Received from Sales

17. Cash Received in the Mail Remittance Advice Person Opening Mail CheckDeposit

18. Cash Received by EFT Company Bank Customer Bank

19. Control Over Cash Payments Voucher Check issued to vendor Approved voucher entered to System Invoice, Purchase Order, and Receiving Report

20. Learning Objective 4 Describe the nature of a bank account and its use for controlling cash

21. Nature of a Bank account and its use for controlling cash

22. Learning Objective 5 Describe and illustrate the use of a bank reconciliation in controlling cash

23. Bank Statement Reconciliation

24. Steps in the Reconciliation Process

25. Learning Objective 6 Describe the accounting for special- purpose cash funds

26. Special Purpose Cash Funds – Petty Cash

27. Learning Objective 7 Describe and illustrate the reporting of cash and cash equivalents in the financial statements

28. NetSolutions - Sales Transactions

29. End of Chapter 5