TOPIC7-QUESTION.docx - Topic 7 internal contro&cash Internal control systems consists of all measures employed to Safeguard resource against waste fraud

TOPIC7-QUESTION.docx - Topic 7 internal contro&cash...

This preview shows page 1 - 3 out of 5 pages.

Topic 7 internal contro&cash Internal control systems consists of all measures employed to : Safeguard resource against waste, fraud and inefficiency Promote reliability of accounting data Ensure compliance with policy and regulation An effective internal control would assis in Preventing ,detecting and correcting irregularities Safeguarding assets from unauthorized disposition Ensuring financial records are complete and accurate, so that they permit timely preparation of financial info&reports Comment on the adequacy of internal control in these cases Separation of duties Cashier receives the cash ,banks it and does the bookkeeping Recording and custody of cash should separate Cashier could keep some cash and ensure records match bank deposit Goods inwards employee, keeps the records of goods in and stock on hand, and authorizes goods out from the ware house Recording and custody of stock should separate The employee could take goods and ensure records match stock in store Office manager pays salaries and prepares the sales invoices Appropriate, no direct link between these 2 activities Documentation The cashier suggests dispensing with the ticket collector in the cinema by rearranging the foyer so cinema-goers must pass by the ticket window,saving cost of tickets and collectors5 Good idea to direct people past the window, but without tickets ,you can’t ensure all the cash receipts go to firm Tickets provide effective internal control of cashier Annual leave The bookkeeper is so loyal that hasn’t taken leave for 5 years No separation of custodianship Required annual leave is good internal control as fraud may be discovered by someone else WHY CASH CONTRO IS IMPORTANT Cash is easily transferred, and not specifically identificable as belong to a particular firm It has the highest inherent risk of assets against fraud/misappropriation
Image of page 1
Need to ensure adequacy of cash ability to pay debts when due and remain both liquid and solvent Cash is one of most vital assets to control Petty cash is a microcosm of internal cash contrlsystem. It is a cash fund that is used for making small payments where it is impractical to pay by cheque Bank statement: prepared from the bank’s records the company’s cash transactions. Cash receipts and payments journal and cash at bank leger a/c: record of your cash transactions A bank reconciliation involves comparing the balances in the cash at bank ledger with the bank statement from the bank, and explaining any differences between the two figures.
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 5 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture