Question

True or False:

-SOX requires a company's management as well as its outside auditors to document and assess the effectiveness of a company's internal controls

-Cash equivalents are defined as short-term investments which have a maturity date less than twelve months from their date of purchase

-When a company receives a check from a customer for work performed, "Accounts Receivable" rather than "Cash" should be debited

-Companies should strive to keep a large amount of petty cash on hand

-When the bank makes an error, the company should correct this error on the bank side of the reconciliation

Answer 1

-SOX requires a company's management as well as its outside auditors to document and assess the effectiveness of a company's internal controls : TRUE

Explanation: SOX was introduced after major corporate scandals like Enron. It focuses a lot on accounting and auditing practices and requires management as well as auditors to assess internal controls very stringently

-Cash equivalents are defined as short-term investments which have a maturity date less than twelve months from their date of purchase: FALSE

These are short term investments with maturity date 3 months or less

-When a company receives a check from a customer for work performed, "Accounts Receivable" rather than "Cash" should be debited : FALSE

Accounts Receivables are debited when the customer pays later i.e. goods sold on credit. When company receives check, bank should be debited

-Companies should strive to keep a large amount of petty cash on hand: FALSE

Petty cash is used for small day to day expenses and is a small amount which is kept on hand

-When the bank makes an error, the company should correct this error on the bank side of the reconciliation: TRUE

In a bank reconciliation statement, errors made by company are corrected on its side and errors made by bank are corrected on its side.