ACC-1A Lecture Notes - Lecture 24: Password, Internal Audit, Physical Security

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8 Sep 2020

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Internal control is a company-wide process that seeks to improve a company"s operations and its financial reporting: helps a company protect its assets. Internal control is the system of policies and procedures used in a company to promote efficient and effective operations, reliable financial reporting and compliance with laws and regulations. One of the most important requirements in regards to internal control is that corporations include in their annual reports to shareholders an internal control report. The broad purpose of internal control is to help management achieve effective and efficient operations, reliable financial reporting and compliance with laws and regulations. Internal control consists of the following five interrelated components: The control environment is the atmosphere in which the members of an organisation conduct their activities and carry out their responsibilities. Many factors affect and organisation"s control environment one of the most important is the overall integrity and ethical values of personnel (standards of behaviour).

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Inaccurate and unreliable information can spell financial disaster for businesses and persons who use this information for decision-making purposes. From the standpoint of a business, accurate and reliable information is necessary in order for a potential investor to have when they are considering investing with the company. If the information is not accurate and reliable, this will potentially harm the investor. Inaccurate financial information may be due to the incompetence of the accountant who prepared the financial statements or due to dishonesty and an attempt to conceal information. Internal control is the system of policies and procedures that a company puts in place to provide reasonable assurances that: The companyâs operations are effective and efficient The companyâs financial reporting is reliable, and The company is complying with applicable laws and regulations

1. In your first post, respond to the following questions:

a. How can a business ensure that the employee who is preparing the financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to be sure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in your work? This may include your schoolwork or the work that you do for your employer.

True or False:

An advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

A properly designed internal control system is a key part of systems design, analysis, and performance.

An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies.

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

A receivable is an amount due from another party.

Credit sales are recorded by crediting Accounts Receivable.

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

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Inaccurate and unreliable information can spell financialdisaster for businesses and persons who use this information fordecision-making purposes. From the standpoint of a business,accurate and reliable information is necessary in order for apotential investor to have when they are considering investing withthe company. If the information is not accurate and reliable, thiswill potentially harm the investor. Inaccurate financialinformation may be due to the incompetence of the accountant whoprepared the financial statements or due to dishonesty and anattempt to conceal information.

Internal control is the system of policies and procedures that acompany puts in place to provide reasonable assurances that:

The companyâs operations are effective and efficient

The companyâs financial reporting is reliable, and

The company is complying with applicable laws andregulations

1. In your first post, respond to the followingquestions:

a. How can a business ensure that the employee who is preparingthe financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to besure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in yourwork? This may include your schoolwork or the work that you do foryour employer.

ACC-1A Lecture Notes - Lecture 24: Password, Internal Audit, Physical Security

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