Review Questions 1. What is internal control? 2. How does the Sarbanes-Oxley Act relate to internal controls? 3. What are the five components of internal control? Briefly explain each component. 4. What is the difference between an internal auditor and external auditor? 5. What is separation of duties? 6. List internal control procedures related to e-commerce. 7. What are some limitations of internal controls? 8. How do businesses control cash receipts over the counter? 9. How do businesses control cash reccipts by mail? 10. What are the steps taken to ensure control over purchases and payments by check? 11. What are the controls needed to secure the petty cash fund? 12. When are the only times the Petty Cash account is used in a journal entry? 13. What are two common methods used when accepting deposits for credit card and debit card transactions? 14. What are some common controls used with a bank account? 15. What is a bank reconciliation? w --34 Financial chapter 8 16. List some examples of timing differences, and for each difference, determine if it would affect the book side of the reconciliation or the bank side of the reconciliation 17. Why is it necessary to record journal entries after the bank reconciliation has been prepared? Which side of the bank reconciliation requires journal entries? 18. What does the cash ratio help determine, and how is it calculated