What does internal control help with?
Reliable financial reporting, effective and efficient operations, compliance with relevant laws and regulations.
What are the 5 primary components of good internal control systems?
Control environment, Risk assessment, Control activities, Information and communication, Monitoring activities.
What are some of the control activities?
Assignment of responsibility, segregation of duties, documentation, physical controls, review and reconciliation.
What activities does a company use depend on?
The risks it is facing, size and nature of company
What is the assignment of responsibility?
Employees are accountable for carrying out a task appropriately.
What is the segregation of duties?
Responsibility for authorization and recording of transactions and custody of assets should be assigned to different individuals.
What is documentation?
Evidence that transactions and events have occurred at specific times and specified amounts.
What are physical controls?
Safeguarding of assets and enhancing the accuracy and reliability of accounting records.
What is review and reconciliation?
Data prepared by employees should be subject to independent review, both internal and external.
What are some of the limitations of internal control?
Cost-benefit considerations, human error, collusion, and management override.
What is fraud?
An intentional act to misappropriate assets or to misstate financial information.
How are bank accounts a key control activity?
Company safeguards cash by using a bank rather than keeping cash on hand, provides a second record of transactions ( one by company, one by bank) , these two accounts can be reconciled.
What are the difference between company records and a bank statement?
Timing differences that result in one of the parties recording the transaction before the other is aware of it.
How do you reconcile the bank account?
Reconcile the balance per the bank statement with the company’s cash balance per the general ledger, both the books and bank balance are reconciled to their adjusted cash balance.
