Chapter 7: Fraud, Internal Control, and Cash
Last Modified: 2012-11-12
- provides opportunities
- lacks sufficient controls to deter and detect fraud
- Companies to pay attention to internal control
- corporate execs and directors to ensure that internal controls are reliable and effective
- sound principles of control over financial reporting
- continual assessment
1). Safeguard the assets from employees and others
2). Encourage employees to follow company policy
3). Promote operational efficiency
4). Ensure accurate reliable accounting records
Information and Communication
- Establishment of Responsibility
- Segregation of Duties
- Documentation Procedures
- Physical Controls
- Independent internal Verification
- Human Resource Controls
- provide evidence that events occurred
- should be prenumbered
- source documents should be sent to the accounting department
- Facility access
- Locking systems
- Removing drives
- Environmental controls
2. Records verified by an employee who is independent.
3. Discrepancies reported to management.
2. Rotate employees' duties and require vacations.
3. Conduct background checks.
- remittance advice
- cash register tapes
- deposit slips
- good internal control over cash
- minimizes cash kept on hand
- double records
- checks paid and other debits
- deposits and other credits
- account balance
- book balance is adjusted to reflect corrections reported by bank. THIS GIVE US OUR TRUE BALANCE
- then the balance per bank statement is reconciled to the TRUE balance per books
Determine outstanding checks.
Note any errors discovered.
Trace bank memoranda to the records.
2. Keep inventory levels low
3. Delay payment of liabilities
4. Plan the timing of major expenditures
5. Invest idle cash
- Expected receipts from the company's principle source of revenue.(cash sales)
- Anticipated receipts of interest and dividends.
- Proceeds from planned sales (investments)
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