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8slides - Chapter 8 Chapter 8 Internal Control and Cash...

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Chapter 8-1 Chapter Chapter 8 8 Chapter Chapter 8 8 Internal Control and Cash Financial Accounting, Sixth Edition
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Chapter 8-2 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 Internal Control Internal Control SO 1 Define internal control. SO 1 Define internal control. Unde r the  S arbane s -O xle y Ac t, all public ly trade d U.S . c o rpo ratio ns  are   required to  m aintain an ade q uate  s ys te m  o f inte rnal c o ntro l.
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Chapter 8-3 Companies  must  develop principles of control over financial reporting.   continually verify that controls are working.  Internal Control Internal Control Internal Control Internal Control SO 1 Define internal control. SO 1 Define internal control. The Sarbanes-Oxley Act The Sarbanes-Oxley Act Independent auditors  must attest to the level of internal control.  SOX  created the  Public Company Accounting Oversight Board (PCAOB) .
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Chapter 8-4 Measures vary with size and nature of the  business. management’s control  philosophy. Internal Control Internal Control Internal Control Internal Control SO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control Illustration 8-1
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Chapter 8-5 ESTABLISHMENT OF RESPONSIBILITY Control is most effective when only one person is responsible for a given  task. Internal Control Internal Control Internal Control Internal Control SO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control SEGREGATION OF DUTIES Related duties should be assigned to different individuals.   DOCUMENTATION PROCEDURES Companies should use prenumbered documents and all documents should be  accounted for.
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Chapter 8-6 Internal Control Internal Control Internal Control Internal Control SO 2 Identify the principles of internal control. Principles of Internal Control Principles of Internal Control PHYSICAL, MECHANICAL, AND ELECTRONIC CONTROLS Physical Mechanical  and Electronic Illustration 8-3
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Chapter 8-7 Internal Control Internal Control Internal Control Internal Control SO 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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Chapter 8-8 Internal Control Internal Control Internal Control Internal Control SO 2 Identify the principles of internal control.
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