W10 - BANK RECONS - THE BANK RECONCILIATION STATEMENT 1...

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1 THE BANK RECONCILIATION STATEMENT
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2 Internal Control Internal Control The Sarbanes- Oxley Act Principles Limitations Cash Controls Cash Controls Use of a Bank Use of a Bank Reporting Cash Reporting Cash Cash equivalents Restricted cash Compensati ng balances Making deposits Writing checks Bank statements Reconciling the bank account Internal Control and Cash Internal Control and Cash Control over cash receipts Control over cash disburseme nts
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3 Methods and measures adopted to: 1. Safeguard assets.  2. Enhance accuracy and reliability of accounting records.   Reduce risk of: a. Errors  (unintentional)  b. Irregularities  (intentional) Internal Control Internal Control LO 1 Define internal control. LO 1 Define internal control.
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4 Measures vary with size and nature of the  business. management’s control  philosophy. Internal Control Internal Control LO 2 Identify the principles of internal control. LO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control Illus tra tio n 8-1
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5 ESTABLISHMENT OF RESPONSIBILITY Control is most effective when only one person is responsible for a given  task. Internal Control Internal Control LO 2 Identify the principles of internal control. LO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control SEGREGATION OF DUTIES DOCUMENTATION PROCEDURES Companies should use prenumbered documents and all documents should be  accounted for.
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6 Internal Control Internal Control LO 2 Identify the principles of internal control. LO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control PHYSICAL, MECHANICAL, AND ELECTRONIC CONTROLS Phys ic a l Me c ha nic a l  a nd  Ele c tro nic
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7 Internal Control Internal Control LO 2 Identify the principles of internal control. LO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control INDEPENDENT INTERNAL VERIFICATION 1. Records periodically verified by an employee who is independent. 2. Discrepancies reported to  management. OTHER CONTROLS 1. Bond employees. 2. Rotate employees’ duties and require vacations. 3. Conduct background checks.
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8 Internal Control Internal Control LO 2 Identify the principles of internal control. LO 2 Identify the principles of internal control. Limitations of Internal Control Limitations of Internal Control Costs should not exceed benefit. Human element. Size of the business.
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9 Cash Controls Cash Controls Internal Control over Cash Receipts Internal Control over Cash Receipts LO 3 Explain the applications of internal control principles to cash receipts. LO 3 Explain the applications of internal control principles to cash receipts.
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W10 - BANK RECONS - THE BANK RECONCILIATION STATEMENT 1...

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