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201Lec07 - 1 CA$H and Internal Controls 201Lec07.PPT...

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Unformatted text preview: 1 CA$H and Internal Controls 201Lec07.PPT Internal Control (IC) consists of . . . . . all the related methods and measures adopted within a business to: safeguard its assets – Employee and external theft, unauthorized use enhance accuracy and reliability of accounting of its accounting records. – Mistakes, errors, fraudulent misrepresentations As of 2002, law called the Sarbanes-Oxley Act (SOX) holds management responsible for maintaining IC system. 2 The 6 IC PRINCIPLES The 6 IC PRINCIPLES 1. Establish responsibility centers Make individuals or specific groups accountable for specific tasks under their control 1. Establish responsibility centers Make individuals or specific groups accountable for specific tasks under their control Example: • One cashier per register. • At end of shift, agree cash received to register tape. • If differences, cashier is responsible. 3 2. Segregate employee duties. Don’t allow only one person to have both:- Physical custody of asset- Record transactions related to asset Includes separating a series of related activities. Goal is to have many employees involved so no one can execute and cover up an error or irregularity. 2. Segregate employee duties . Don’t allow only one person to have both:- Physical custody of asset- Record transactions related to asset Includes separating a series of related activities. Goal is to have many employees involved so no one can execute and cover up an error or irregularity. Example: • Cashier forwards register tape to accountant. • Accountant records in books but never has access to cash....
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201Lec07 - 1 CA$H and Internal Controls 201Lec07.PPT...

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