Warr22e_IM_TM_Ch08 - Transparency Master 8-1 If you owned a...

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Transparency Master 8-1 If you owned a business, would you expect your employees. . . 1. To work to achieve the business goals and objectives you establish? 2. To use business assets (such as ma- chinery or automobiles) only for legitim- ate business purposes and avoid wasting business resources? 3. To record accurate data regarding busi- ness transactions so you could accur- ately judge how well your business is do- ing? 4. To refrain from stealing your cash or in- ventory?
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Transparency Master 8-2 FIVE ELEMENTS OF INTERNAL CONTROL 1. Control environment: Management attitude should be committed to ethical busi- ness practices and to following established control proced- ures. 2. Risk assessment: Identify and minimize internal control risks. 3. Control procedures: Employees should be adequately trained and supervised. Rotate job duties or require mandatory vacations. Clearly define job responsibilities and keep employees ac- countable. Separate responsibilities for related operations. Separate operations, custody of assets, and accounting. Use proofs and security measures: Immediately deposit all cash in a bank account. Use cash registers to record sales. Have employees bonded. Install security cameras or hire security guards. 4. Monitoring: Watch for warning signals indicating dishonesty or fraud. 5. Information and communication: Gather and communicate appropriate information to assess and monitor internal controls.
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Transparency Master 8-3 SEPARATING DUTIES FOR RELATED OPERATIONS What risk do you have if the following oc- cur? 1. Salesperson (paid on a commission basis) is responsible for granting credit. 2. Purchasing agent orders supplies, in- spects supplies to verify that the correct items and quantity were received, and au- thorizes payment of the vendor's invoice. 3. Worker in a donut shop takes a customer- 's order, packs his or her donuts in a bag or box, rings the order on a cash register, and takes the customer's money.
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Transparency Master 8-4 SEPARATING OPERATIONS, CUSTODY OF ASSETS, AND ACCOUNTING What risk do you have if the following oc- cur? 1. A department store allows its credit custom-
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Warr22e_IM_TM_Ch08 - Transparency Master 8-1 If you owned a...

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