Internal controls
Policies and procedures in place to help company achieve its objectives
- required by sarbanes oxley
- ensures accurate reporting
- safeguards the assets
4 objectives of accounting systems
- Provide accurate financial reporting
- Safeguard the assets
- Comply with laws and regulations
- Ensure efficiency of operations
Who is responsible for financial statements?
Management responsible for checking financial statements
What is accounting
Accounting is the link between management and external parties
How can users feel comfortable relying on the financial statements?
GAAP (generally acceptable accounting principles)
Why?
Management would want to report positively about themselves since they make their own financial statements, which introduces bias.
Auditors responsible to verify managements financial statement reliability 4 external users.
—> issue audit report/opinion on financial statements
—> gather evidence that supports a conclusion
why need an accounting system/ accounting records?
- performance measure, how much profit are you making
- compliance issues, IRS
- raise capital
- insurance for company from employee
separation of duties
authorization – approval
recording – transaction into system (journal entry, general ledger)
custody – over an asset
why need monthly statements
used as a control in case there are issues.
people will call if amounts dont match up.
