Screen Shot 2019-11-08 at 10.09.33 PM.png - Sarbanes-Oxley Act o Applies to publicly traded US corporations o Required to maintain a system of internal

Screen Shot 2019-11-08 at 10.09.33 PM.png - Sarbanes-Oxley...

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Unformatted text preview: Sarbanes-Oxley Act o Applies to publicly traded US corporations o Required to maintain a system of internal control Corporate executives and boards of directors must ensure that these controls are reliable and effective o Independent outside auditors must attest to the adequacy of the internal control system SOX created the public company accounting oversight board (PCAOB) . Internal control o Methods and measures to adopted to: Safeguard assets Enhance accuracy and reliability of accounting records Increase efficiency of operations Ensure compliance with laws and regulations 5 primary components of internal control o Control environment o Risk assessment Control activities o Information and communication o Monitoring . Principles of internal control Segregation of duties Different individuals should be responsible for related activities o Record keeping for an asset should be separate from physical custody of that asset Documentation procedures Companies should use prenumbered documents and all documents should be accounted for Employees promptly forward source documents for accounting entries to the accounting department Independent internal verification Records periodically verified by an employee who is independent o Discrepancies reported to management Human resource controls o Bond employees who handle cash Rotate employees' duties and require vacations Conduct background checks Mail receipts . Mail receipts should be opened by two people, a list prepared, and each check endorsed "For Deposit Only" Each mail clerk signs the list to establish responsibility for the data . Original copy of the list, along with the checks, is sent to the cashier's department Copy of the list is sent to the accounting department for recording. Clerks also keep a copy . Internal control over cash disbursements is more effective when companies pay by check or electronic funds transfer (EFT) rather than by cash Applications: Voucher system controls Petty cash fund Voucher An authorization form prepared for each expenditure in a voucher system Reconciling items Deposits in transit o Outstanding checks Bank memoranda Errors Restricted cash o Cash that is not available for genera; use but rather is restricted for special purposes Cash budgeting Shows anticipated cash flows, usually over a one to two year period Cash receipts Cash disbursements Financing activities Enables the company to plan ahead to cover possible cash shortfalls and to make investments of idle funds Contributes to more effective cash management...
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  • Spring '14
  • BrigidA.Schaffer

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