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ch 7 - Chapter 7 INTERNAL CONTROL AND CASH 1 1 11...

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1 Chapter 7 INTERNAL CONTROL  INTERNAL CONTROL  AND CASH AND CASH
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2 Internal control Safeguards an organization’s  assets from Employee theft, robbery,  unauthorized use Enhances the accuracy and  reliability of accounting records Risk of errors and irregularities PRINCIPLES OF INTERNAL  CONTROL 11 1
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3 PRINCIPLES OF INTERNAL  CONTROL
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CONTROL Establishment of  responsibility :   most effective when  only one person is  responsible for a given  task Segregation of  duties the work of one  employee should  provide a reliable   basis for evaluating  the work of              another employee
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5 Documentation procedures :   documents provide evidence that  transactions and events have  occurred PRINCIPLES OF INTERNAL  CONTROL
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Physical, Mechanical, and  Electronic Controls
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Independent Internal Verification Independent Internal Verification
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8 Independent Internal Verification Independent Internal Verification Bonding of employees who handle cash Rotating employee’s duties and requiring employees to take vacations
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9 Limitations of Internal Controls Cost/Benefit - cost of establishing procedure should not exceed expected benefit Human element - fatigue, carelessness, indifference Collusion - two or more individuals who work together to get around controls Size of business
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10 Review Segregation of duties means? a. Rotating employee duties and  requiring vacations. b. Reviewing, comparing and reconciling  information from two sources. c. The responsibility for related activities  should be assigned to different  individuals. d. Physical separation of employees  from each other.
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11 Cash consists of...
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