Chapter 4 - ACC210 Spring 2011 Internal Controls and Cash...

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ACC210 – Spring 2011 “Internal Controls and Cash” Chapter 4 Christopher T. McKittrick CPA, MBA, CFE
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Chapter 4 – Objectives – IC and Cash • Explain the need to establish an ethical business environment • Describe and apply stakeholder analysis to evaluate an ethical dilemma • Discuss the role of internal controls in managing a business • Discuss the five elements of internal control • Describe how businesses control cash • Describe how businesses account and report cash • Describe the cyclical nature of business activity • Explain the principles of cash management
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Thought for the Day There can't be two “you’s”. When you get out of bed in the morning and think about what you want to do that day, ask yourself whether you'd like others to read about it on the front page of tomorrow's newspaper. You'll probably do things a little differently if you keep that in mind.” CNN: Business Leaders Share Secrets to Their Success Warren Buffett
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Ethics and Decision Making In ANY business, companies have to be aware not only of the economic impact of their decisions, but also of their ethical impact. Good Ends? Bad Ends? Information being used for?
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Shareholder Losses from Financial Statement Fraud Schemes • Tyco $84,200,000,000 • Lucent 55,500,000,000 • WorldCom 26,900,000,000 • Enron 25,000,000,000 • Cendant 11,300,000,000 • Microstrategy 10,400,000,000 • Xerox 9,800,000,000 • Qwest 9,800,000,000 Financial statement fraud causes a decrease in market value of stock of approximately 500 to 1,000 times the amount of the fraud
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Deterioration in Ethical Values • According to surveys in U.S. News and World Report: – 80% of "high-achieving" high school students admit to cheating. – 51% of high school students did not believe cheating was wrong. – 95% of cheating high school students said that they had not been detected. – 75% of college students admitted cheating, and 90% of college students didn't believe cheaters would be caught. – Almost 85% of college students said cheating was necessary to get ahead Outline: Incentives, Greed, Ethics and Rationalization
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Corporate Scandals Scandal prevention is of paramount importance to be successful and stay in business Ethical business is GOOD BUSINESS!
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Pressures (Situations and Incentives) Opportunities Rationalization (Personal Characteristics and Attitudes) The Fraud Triangle
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Defining Ethics Understanding of ―right‖ and ―wrong‖ … … and the ability to distinguish between the two! Integral part of … life, … and business! Corporate behavior should be based on principles of integrity and fairness!
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Ethics in Business • Most people in business face ethical dilemmas from time to time • Must consider long-term and short-term consequences – Decide the ―right thing to do‖ • … for the organization • … for yourself! • Effectiveness of internal control systems
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This note was uploaded on 03/10/2011 for the course ACC 210 taught by Professor Staff during the Spring '07 term at N.C. State.

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Chapter 4 - ACC210 Spring 2011 Internal Controls and Cash...

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