Ch+07+Edited

Resource controls 1 bond employees 2 rotate employees

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Unformatted text preview: vacations. 3. Conduct background checks. 7-9 SO 2 Identify the principles of internal control activities. 7-10 7-11 7-12 7-13 7-14 7-15 Fraud and Internal Control Fraud and Internal Control Limitations of Internal Control Human element. 7-16 Costs should not exceed benefit. Size of the business. SO 2 Identify the principles of internal control activities. 7-17 Cash Controls Cash Controls Cash Receipts Controls Illustration 7-4 7-18 SO 3 Cash Controls Cash Controls Cash Receipts Controls 7-19 SO 3 Illustration 7-5 Cash Cash Cash Cash Receipts Receipts Controls Controls Controls Controls Over-the-Counter Receipts Important internal control principle— segregation of record-keeping from physical custody. 7-20 SO 3 Explain the applications of internal control principles to cash receipts. Cash Receipts Controls Cash Receipts Controls Mail Receipts: Each mail clerk signs the list to establish responsibility for the data. Original copy of the list, along with the checks, is sent to the cashier’s department. 7-21 Mail receipts should be opened by two people, a list prepared, and each check endorsed. Copy of the list is sent to the accounting department for recording. Clerks also keep a copy. SO 3 Explain the applications of internal control principles to cash receipts. Cash Controls Cash Controls Review Question Permitting only designated personnel to handle cash receipts is an application of the principle of: a. segregation of duties. b. establishment of responsibility. c. independent check. d. other controls. 7-22 SO 3 Explain the applications of internal control principles to cash receipts. Cash Controls Cash Controls Cash Disbursements Controls Generally, internal control over cash disbursements is more effective when companies pay by check, rather than by cash. Applications: 7-23 Voucher system Petty cash fund SO 4 Explain the applications of internal control SO principles to cash disbursements. principles Cash Controls Cash Controls Cash Disbursements Controls Illustration 7-6 7-24 SO 4 Cash Controls Cash Controls Cash Disbursements Controls Illustration 7-6 7-25 SO 4 7-26 Cash Controls Cash Controls Review Question The use of prenumbered checks in disbursing cash is an application of the principle of: a. establishment of responsibility. b. segregation of duties. c. physical, mechanical, and electronic controls. d. documentation procedures. 7-27 SO 4 Explain the applications of internal control SO principles to cash disbursements. principles Cash Controls Cash Controls Cash Disbursements Controls Voucher System 7-28 Network of approvals, by authorized individuals, to ensure all disbursements by check are proper. A voucher is an authorization form prepared for each expenditure. SO 4 Explain the applications of internal control SO principles to cash disbursements. principles Cash Controls Cash Controls Cash Disbursements Controls Petty Cash Fund - Used to pay small amounts. Involves: 1. establishing the fund, 2. making payments from the fund, and 3. replenishing the fund. 7-29...
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