Survey Accounting 3rd Ed Chap 2 Test Essay

First and foremost, the accounting system used should be updated. The case stated that the system was 30 years old and that prior accounting period transactions could not be locked down, which enabled internal control processes to be bypassed. Enhancing internal

2. Prepare a list of the controls described in the case. What control problems are they designed to address? Are the managers interviewed for the case justified in being proud of their company’s control system? Why or why not?

It follows a strong internal control system for cash. A separate person is appointed to approve all purchases, payroll and any disbursement of cash. At the end of each month company prepares bank reconciliation statement to reconcile cash book balance and bank statement balance. Company keeps proper inventory record system. All these prevent frauds and ensure smooth functioning of the business.

The chances of failures can be decreased by executing the checks on the systems. These keep an eye on the systems preventing risks from occurring, and these checks are avoided as the interior controls. The motivation behind the inner controls is to keep the organization safe from risks associated with the modernized accounting-system risks. Organizations change their manual accounting systems to computerized accounting systems for different reasons, this incorporates the points of interest, and the explanation behind utilizing electronic accounting information is instinct. The organizations embrace the policies of their

Required: Discuss Douglas and son’s internal control procedures related to cash receipts, nothing both weaknesses and strengths.

Having internal controls is one thing, but how the company evaluates that control is a matter all by itself. Being an independent auditor, it is our job to understand an entity and

3. (TCO 5) Internal Control Procedures are required to safeguard company assets and to ensure ethical operation

Internal control has different control principles, establishing responsibility focuses on allotting different tasks to a concerned person, like each sales person should have an individual sales register. Different controls on physical, mechanical and electronic should be exercised as this will help in reducing the unauthorized use of different resources, this is essential for safeguarding assets and

The internal control structure that can be installed in a new accounting system will help eliminate security risks through mechanics and procedures rather than expensive people ("Accounting - Basic Accounting Components of the Accounting System", 2003).

of internal controls are (1) to safeguard assets and (2) to ensure reliability of the financial

One control activity in LJB that needs to be addressed is the establishment of responsibility. According to Kimmel (2011), “Control is most effective when only one person is responsible for a given task” (p. 338). Petty cash responsibility needs to be assigned to one custodian to be most effective, and that employee should keep it under lock and key as well as keep a detailed journal of use; this practice also goes along with physical control activities. Each transaction of petty cash needs to be documented on pre-numbered receipts, as well as signed by the custodian and the person receiving the payment. Doing so will allow audits to verify the amount in the account and the payments and be able to track if there is money missing at any given time. Another area that needs to establish responsibility is implementing personal passwords to access the company’s network. Using unique passwords will help identify a fraud or company violation should one occur. Using unique passwords also allows only those employees who are authorized and/or qualified to carry out specific tasks.

Internal controls prevent errors and irregularities from happening. If errors or irregularities do happen to occur internal controls will help ensure that they are detected in a timely manner. Internal controls also encourage adherence to prescribe policies and procedures. Internal control are also put into place in order to protect employees by outlining tasks and responsibilities, providing checks and balances, and also from being accused of misappropriations, errors and irregularities.

The framework describes internal control as a process designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

Finally, we also observed that the cashier deposits mail receipts in the bank weekly. The internal storage of cash on the premises of the Company is not advisable for obvious reasons- theft, robbery, and unauthorized access. Employees with other intentions can alert external cohorts to raid or rob the Company at night or at another time to gain access to the cash stored on the premises. Additionally, the storage of the cash on the premises presents a "working hazard" for the employees as outsiders wanting to gain access to the cash may subject them to unwanted raids. The use of a bank on a daily basis contributes significantly to good internal control over cash. The company can safeguard the cash on a daily basis by using a bank as a depository and

Effective internal controls protect a company’s assets, maintain compliance, improve operations, prevent fraud, and promote accuracy in financial reporting. In 1992 the