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Definition
corporate execs and board of directors must make sure there areinternal controls
independent outside audits
PCAOB
Investors trust companies that use this, managers find it helpful |
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Definition
safeguard assets
enhance reliability of acct record
increase efficiency
ensure compliance w laws |
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| Five Main Components of IC |
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Definition
control environment
risk assessment
control activities
information and communication
monitoring |
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| Principles of Internal Control |
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Definition
Est. of Responsibility
(only one person is responsible for a given task)
Segregation of Duties
(to detect of prevent irregularities in performance of an employee’s duties (records vs physical assets)
Documentation Procedures
Physical Controls
Independent Internal Verification
(review, comparison, etc of data prepared by employees)
Human Resource Controls |
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| Limitations of Internal Control |
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Definition
Costs shouldn’t exceed benefits “reasonable assurance”
Human element (two may work together)
Size of business |
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Definition
Opened by two people
Each mail clerk signs the list
Original copy of lists and checks sent to cashiers & acct dept |
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| Cash Disbursements are more effective when |
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Definition
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Definition
Transactions that need to be adjusted (errors or time lag)
outstanding checks
deposits in transit
charges for NSF Checks
credits for interest earned
misc debt etc |
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Definition
Cash (even VISA ETC)
Cash Equiv: investements that mature within 90 days
Restricted Cash: for use of loan requirements
Lines of Credit (only when the entity draws on this acct is it a liability) |
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| Principles of Cash Management |
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Definition
Increase collection of receivables
Keep inventory low
Monitor payment of liabilities
Plan major expenditures
Invest idle cash
Anticipate adequate cash for operations |
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Definition
| network of approvals by authorized indiv. to ensure check disbursements are proper |
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