Accounting Lecture Week 5

Accounting Lecture Week 5 - Its Nice to Have Assets Its...

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It’s Nice to Have Assets. It’s Nicer to Keep Them. In our final week we look briefly at internal control. This is the system an organization employs to safeguard its assets and enhance the quality and reliability of its accounting records. Every organization will have a slightly different system that reflects its culture, experience, industry and resources. In this brief lecture we will look at some of the principles used to develop a system of internal control. Why Is Internal Control Important? There are a couple of reasons. Even without poor behavior on the part of employees or the employers, assets are hard to keep. Even metal items rust; decay. Internal control procedures should be put in place to assure that assets will be used and not allowed to go to waste through natural processes. Now take a look at Cash. Bills stick together, and are easily dropped and lost. How are you going to make sure that all the dollar bills get counted; none are lost; and none are exposed to forces like fire that can destroy the assets? In addition to straightforward maintenance, internal control faces the problem of what to do when an employee is less than honest. In some circumstances such as catastrophic illness otherwise honest and ethical employees make bad judgments. How are you protecting your assets from these bad judgments? In other cases employees simply feel entitled to “their share” of your inventory. What are you going to do to protect
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