Key Terms
Fraud
Intentionally deceiving a person or organization, or misrepresenting a relationship, to secure a benefit (financial or n
Financial statement fraud (cooking the books)
Using financial statements to conceal the actual financial condition of a company or hide illegal transactions.
Internal controls
Policies and procedures that manage risk and reduce fraud. Internal control system: the complete set of all controls and
Internal control system
The sum of all internal controls and policies within an organization that protect assets and data.
Petty cash fund
A predetermined amount of cash kept on hand for small, day-to-day purchases where writing a check is impractical.
Imprest account
An account that contains a fixed balance. It is only debited when the fund is established or when the total balance is i
Debit
Expense accounts
Credit
Cash/Checking Account
INTERNAL CONTROL NOTE
A petty cash voucher (receipt with manager signature) is required for every petty cash expenditure. Consistently short p
Bank reconciliation
Internal report reconciling bank balance to book balance. Bank service fee: monthly charge by the bank for account manag
Action
ADD or SUBTRACT from book balance depending on the error Journal entry required to correct the error
Journal entry required
Debit cash, Credit notes receivable (and interest income if applicable)
Bank Side
Starting bank balance + Deposits in transit
Book Side
Starting book balance + Interest income + Notes collected by bank
Cooking the books
Using financial statements to misrepresent a company's actual financial condition. COSO: Committee of Sponsoring Organiz