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27 Cards in this Set
- Front
- Back
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The Sarbanes-Oxley Act
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requires that companies par attention to internal control.
Internal control is reliable and effective and working |
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Reasons for committing Fraud
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opportunity
financial reasons rationalization |
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Internal Control
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-Protects assets
-reduces risk of errors and irregularities -Increase Efficiency |
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Components of Internal Control
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Control environment
risk assessment Control activities Information and Communication Monitoring |
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Control Environment
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organization values integrity and ethical activity
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Risk Assessment
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Evaluate risks
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Control Activities
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addresses risk
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Information and Communication
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ensures that the system will communicate information with all the correct parties
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Monitoring
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addresses adequacy
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Principles of Control Activities
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Establishment of Responsibility
Segregation of Duties Documentation Procedures Physics Controls Independent Internal Verification Human Resources Controls |
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Establishment of Responsibility
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-most effective when 1 person is given a task
-requires limiting access only to one authorized personnel and the identifying that person |
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Segregation of duties
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-Responsibility should be assigned to different individuals
-One person should be able to provide reliable basis for evaluating the work of another employee -Should not have physical access |
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Documentation Procedures
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-Evidence that transaction occurred
-Documents should be prenumbered -Documents should be forwarded to accounting department promptly |
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Physical Controls
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Safes
Warehouses Codes Alarms Monitors Time Clocks |
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Independent Internal Verification
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-Made periodically on surprise visit
-Should be done by someone outside -Discrepancies should be reported |
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Internal Auditors
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Evaluate the effectiveness of the company system of internal control
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Human Resource Control
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-Bonding of employees who handle cash
-Rotating duties and requiring vacations -Background tests |
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Cash Balance Per Bank
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ADD: Deposit in Transit
LESS: Outstanding Checks Bank Errors =Adjusted Cash Balance |
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Cash Balance Per Books
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ADD: Collection of Notes Receivable
LESS: Service Charges NSF Checks Company Errors =Adjusted Book Balance |
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Adjusting Entry of Notes Receivable
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Cash
Misc. Expense ---------Notes Receivable ---------Interest Revenue |
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Adjusting Entry ERROR
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Cash
------------Account Payable |
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Record NSF Check
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Accounts Receivable
----------------Cash |
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To Record a Service Charge
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Misc. Expense
-------------------Cash |
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To Establish A Petty Account
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Petty Cash
---------Cash |
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To Reimburse a Petty Account
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Expenses
-------(Cash over and Short)----- ----------Cash |
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To Increase money in Petty Account
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Petty Cash
------------Cash |
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To decrease money in petty account
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Cash
---------Petty Cash |
