Week 3 Lecture - Week 3 Lecture: It's a Matter of Control...

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Week 3 Lecture: It's a Matter of Control Internal Controls | Cash Controls | Bank Reconciliation | Uncollectible Accounts | Notes Receivable Controls over cash and receivables is an important issue for business owners and managers. Risks exist from customer and employee theft as well as errors in record keeping. Lack of or weak controls increase these risks, so systems and procedures should be designed to include good controls. This furthers the goals of owners, managers, and accountants alike. Internal Controls The goals of internal controls are to safeguard company assets and to increase the accuracy of accounting records. Internal controls have always been a concern of accountants and managers. However, after the Enron and Worldcom scandals of 2001, came new accounting regulations in the form of SOX, the Sarbanes-Oxley Act of 2002. SOX made the responsibility for internal controls more defined and compliance-based. Auditors now provide a formal documented opinion about a company’s internal controls as part of their annual audit procedures for public corporations. Every company should be aware of the components of internal controls: The control environment refers to expectations communicated from the top. A company’s mission statement and objectives as well as the model set by management have an influence on the attitudes and behavior of workers. Risk Assessment involves an awareness of areas of risk within a company. Identifying these areas is important to controlling them. Control procedures are all techniques and processes designed to control risks. Monitoring controls are the back-up procedures that control the control procedures, like internal auditors. Because the information system is so critical to supplying accurate and reliable information, it must be part of internal controls. There are some basic principles of good internal controls. They are as follows: Employees should be competent , reliable, and ethical . This principle includes being sure that our employees have the necessary skills to complete the jobs required at the appropriate level of competence, and includes cross-training employees to provide good coverage when needed due to illness or vacations. Establishment of responsibility is needed to ensure that employees are aware of their own responsibilities and can be held responsible for them. Separation of Duties
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This note was uploaded on 08/02/2009 for the course ACCT 212 taught by Professor Partridge during the Summer '09 term at DeVry Cincinnati.

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Week 3 Lecture - Week 3 Lecture: It's a Matter of Control...

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